Out of curiosity, did H.L. Mencken postulate what would happen subsequent to the electorate delivering a downright moron to the White House?
18
Krugman is so anti-Trump that it's hard to take anything he writes seriously.
21
This is what happens when we have a president with room temperature IQ and is a narcissist and surrounds himself with sycophants.
42
The Chinese plan for years and decades where Trump plans for tomorrows headlines and what Fox and Friends have to say about him. They recognize a bully who will cry and whine when he's punched in the face. They have their fist half-cocked and are waiting for an opportune moment to break Trump's nose. Maybe Xi and Putin are really waiting to take the U.S. down all the way.
19
"Teach" Trump? There is no way to penetrate a skull that thick.
25
Arrogant ignorance is the most evil force in the world. We have a president and cabinet that personifies both. They cannot learn because they are already smarter than everyone else.
Trump's greatest talent is going broke. Bankrupt over and over, what can he possibly know about international finance? Oh, yes, and there is Jared, who would have lost his shirt were it not for his Middle Eastern buddies.
Plus, none of his base understands economics. They barely understand arithmetic. You charge too much and it costs us to buy from you so we will just make your goods cost more and we won't buy from you at all and then you will lower your prices. Huh? That is his very simplistic thinking. When he says "millions of dollars are pouring in" does he mean he read some kind of report with those figure? Naw. He just makes them up like he does everything else. If you contradict him, you get fired.
Tell the MAGA crowd that the prices they pay for the many day-to-day items they purchase relatively cheaply will double in price even at Walmart's very soon and that is the fault of the POTUS. Tell them. Wait, Trump will tell them to blame Obama, so maybe don't tell them. That way they can continue to blame Hillary's emails. The Donald ducks all responsibility! He is a quack.
34
Sir and Mr. Paul Krugman....
Respectfully,
Thank you
15
The Chinese are simply waiting out the Trump presidency. Like the rest of world, they see him as a lying buffoon. His word and commitments are meaningless.
Further, It is important for them to avoid giving him a political victory. They will take pain until he is gone.......
21
Maybe the Chinese have a plan. Ruin the American economy on multiple fronts with multiple tactics at an appropriate time before your next election. Unlike Trump and his band of idiots the Chinese have a great number of rational economists who, I am sure, have a plan. Or more likely multiple plans. The Russians were effective with media manipulation, the Chinese will be devastating in their assault on voting decisions simply by causing the American economy to tank.
After all, "it is the economy ...."
Editor’s note: This comment has been anonymized in accordance with applicable law(s).
17
Trying to teach economics to Trump is like trying to teach Einstein’s theory of relativity to a lizard. It’s not in the lizard’s DNA.
16
To understand Trump's China Trade policy one has to bear in mind what New Yorker writer Fran Lebowitz once said of him, "seriously, you've never met anyone as dumb as Donald Trump".
26
Mr. Krugman,
Let’s boil it down:
Trump’s modus operandi:
Load, fire then aim
15
Methinks Xi is a little more informed than Trump on economics. Didn't one of Trumps professors at Wharton describe Trump as the most stupid student he had ever attempted to teach. Before Trump, I had no idea the the President had so much power when it came to dealing with issues of trade and tariffs, how can we keep a check on this person when it seems he can do whatever he wants. I rather suspect the farmers are beginning to realize the error of their ways in putting an idiot in the White House. But hey, perhaps we will begin to see some much needed changes in the diversity of crops that should be grown in order to help deal with the decline in the insect population. So much Soy.
11
Just another reason to begin impeachment hearings, although his sociopathic personality doesn't rise to the level of "high crimes and misdemeanors."
5
Good one, Paul. The day Donald Trump decides to listen one other than Vladimir Putin, Sean Hannity, or possibly, Rupert Murdoch, will be the day Haley's comet reappears. 45 is a narcissistic, nihilistic sociopath; he could care less about the other humans that are on our planet.
6
What a severe assessment of the disgrace we have burdened ourselves with, brutus ignoramus Trump, so self-centered he won't listen, and even less, follow, any expert recommendation to keep American economy afloat. Certainly no long-term plans, just hiccups of a 'cowboy attitude' of irresponsible 'off the cuff' stupid bravados. I guess no one thought that, given the immense powers the presidency confers, we would ever confront such a charlatan, such an expert liar (in the mix of incompetence and corruption) to his 'base' that seems convinced that no matter how idiotic his abusive ranting, it remains, to them, the 'gospel' truth. Sorry Paul, however deep your concerns, do not expect anything good out of this rabid dog in the WH. He is beyond repair. But we are not, as it is our duty to oust him, so the rule of law may return, and the current pluto-kleptocracy is changed back to a democracy. And to a bit of decency.
8
"ignoramuses" says it all.I love that word.
2
It's called "learning disability".
4
“his general belligerence (not to mention his racism) has left America with almost nobody willing to take its side in global disputes.” Who needs allies when you’ve made America so great?
6
I'm curious if any Trump cultists will try to defend his absurd tweet and what sort of nonsense they will try to peddle.
1
One mad person in the negotiation room is bad enough. Some people said China is facing too many issues between the U.S. and HKSAR but the same set of circumstances can also point to its restraints because it knows MAD (mutually assured destruction) is a lose-lose proposition; otherwise, it could simply pick something to execute the time honored wag-the-dog operation
2
We are comparing an inept 1-ball juggler with a 5-ball juggler when comparing Trump's inept knowledge of global economics with that of China's experience and adept knowledge developed over the millennia.
5
The enemy of my enemy is my friend!
Too bad we don't have an international trade alliance aligned against Chinese unfair trade practices....oh wait....darn!
3
In the 19th Century when the sun never set on the British Empire, a fabric manufacturer was reported to have said that, if they could get the Chinaman to add an inch to his shirt, they could make fortunes. Even then the Chinese market was enormous. And it's more enormous now.
China has a billion more people than we do in the USA! That fact has never been absorbed by the American people. Part of the Chinese economic strategy is to build consumption in that market and to have Chinese factories meet that demand.
The fact that our economy is global in unprecedented ways is another factor that has been hard for us to absorb. It's hardly a simple matter of us selling products to the Chinese and them selling other things back to us. Who knew it was complicated?
That seems to be the motto of this administration.
8
Love me some K-man! A pessimist after my own heart :-)
The Lyin' King is incapable of learning. Learning requires curiosity and respect for facts, neither of which he has.
China is coming. They are already here. They will be the world economic power within ... 10 years? And they play the long game. We had better start preparing now for a world in which China calls the economic shots.
9
President Trump has in 3 years solved the geopolitical threat that is China. Now under President Trump's watch, China will never be able to supercede the United States. Anyone criticizing the president is a traitor as far as I'm concerned.
2
Trump's racist hate isn't confined to Blacks, Latinos, or others "you wouldn't want to live with."
He sees Asians -- Chinese in particular (as if he could tell the difference among Japanese, Koreans, Pilipinos, Taiwanese, Mongols, Vietnamese, Cambodians, Thai, the Barma, and hundreds of other tribal ethnicities) -- as weak, passive and submissive but shrewd, conniving, "inscrutable" and deceptive. Trump's ignorance of Asians unfortunately is shared by many Americans who also share his contempt of them.
Many Asian cultures abhor confrontation, emotional hysteria, humiliation, obsessive individualism, belligerence, attention-seeking -- all of them core aspects of Trump's mindset (more accurately mind-flux).
Most Asian cultures are ancient and until Western colonization led by the British, most were homogeneous in clans, tribes and ethnicity with no significant racial diversity, which stands as a glaring weakness in a globalizing world.
China's economic development over the past 75 years is astonishing -- from a rural agrarian feudalism to an economic superpower that landed a lunar probe on the dark side of the moon and is racing to build the first quantum computer.
No country has lifted more people out of abject poverty as rapidly as China has.
China's reality is 1.6 billion people living in habitable geography that's roughly half the size of the continental US.
Chinese have a millennium of experience as traders.
Only a fool thinks they can be bullied.
14
My bet would be that the Chinese will over power the Russians in cooking our election so Trump loses. They are infinitely smarter than Russians and richer.
5
Good analysis of our situation! In other words - Trump is like a drunk in a fight against a polished heavy weight. Unfortunately, he's dragging the rest of us along.......
7
"Trade wars are very easy to win."
6
If President Obama used the exact same tactics with China Krugman would be praising him.
5
Another possibility: maybe Trump's China trade policy is working exactly as he intends, but in support of a different goal, i.e. create short-term spikes up and down in the stock market? That could be immensely profitable to someone who knew Trump's tweets and statements were coming in advance, and went long or went short on stocks ahead of the statements? Not that I would want to impugn the motives of a family and and administration that is such a model of honesty and rectitude...
9
Trump and those who work for him are basically grifters. They haven’t learned anything since high school. The inmates are running the asylum. Many thought the well oiled post WW2 world could run on auto pilot and be grifted for their own benefit. They never learned that running a complicated world requires training and intelligence. It does not run itself. Even “ The best and the brightest” didn’t know what they were doing. These ignoramuses are now finding out, or will find out, they also do not know what they are doing wrong. It is just too bad they are destroying so many innocent lives in the meantime.
6
Trump's grammar is also quite bad. He wrote "massive amounts of money is...". He repeats words, makes spelling mistakes and reasons like a child.
5
“Oh well. I guess arithmetic is just a hoax perpetrated by the deep state.”
Nice one, Paul.
(And Trump attended Wharton?)
4
Paul Krugman, you should have realized by now that Donald Trump learned everything he needed to know to run the world by the age of 12 - and the three years before that he was coasting. The 25th amendment has effectively been annulled by the magnificent foresight of the tweeter-in-chief, so no one need worry there might be some interruption of the flow of unbridled wisdom emanating from the only one who knows how to fix, uh, everything!!!
3
I don't know if Trump is an employee of Vladimir Putin. Perhaps it just looks that way based on all the evidence. I can't ANYTHING Trump does or says. Perhaps he's senile. Perhaps he's insane. Perhaps he has a personality disorder. Perhaps he just likes the role of troublemaker. The only thing that seems abundantly clear is that any attempt to reason with him is doomed to failure. Not even his closest aides can say why. But WHY, for the love of God, did ANYONE vote for him?
9
It is interesting to see people claim in comments that bullying is the way to make China yield to Trump's demands.
Think about that.
1
Certainly the President has a hand in the economy's movement, but he is by no means the guiding light. He is backed by a sufficient number of our Congress and many more business owners to be assured most of what he dictates is passed and at worst encounters no market headwind.
He is embarking on a course with China in which we the people will lose even more than has already been taken from our children and theirs.
Mr Trump is essentially an open mic for big business which is rewarding him and his cronies in Congress with some of the taxpayer money "our" President has already lavished on them.
Heads he and they win, tails we lose
5
I always enjoy your articles!
4
China knows that Trump is an unfortunate anomaly and that he'll be nothing but a dark spot in our history soon enough. China has nothing against our citizens and will just put up with Trump like the rest of us are forced to do.
Vote in 2020 and help end this nightmare!
4
AMEN! The gross incompetence of the Trump administration is on full display in this trade war. I don't like some of China's trade policies either, such as forced technology transfers or outright IPR theft, not to mention subsidizing certain industries, like solar panels, to kill competition and gain global dominance. China, however, is no banana republic and we just can't bully them around. Before taking on China in these maters we should have joined the TPP and developed a coordinated strategy with the EU, which has many of the same concerns we do about China's trade practices. But these concepts are way to complex and complicated for Trump to understand, let alone execute. In a trade war both sides lose. I suppose the side that loses the least could be considered the winner, but it is a hollow victory, kind of like France "winning " WWI.
85
China's original response to the trade imbalance was to offer 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 wanted 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 gets that economies don't win because someone loses. Which we know is how Trump views everything.
Trump wants a trophy for re-election that he's not going to get from China now flying its Don't Tread on Me flag. As a Chinese pundit put it: Trump's Art of the Deal is "art" missing an "F".
5
Mr Krugman, I appreciate your opinions and learn alot about economics reading your NYT column. It is one of the reasons I subscribe to NYT.
From my understanding are large caches of US monies throughout the world economy for use in the buying of oil , they're called petrol dollars and this way of paying for oil was installed by Kissinger after WWII and has been such ever since. We don't know actually how much is really out there but if China ( and Russia) decided to forgo this payment method and use the yuan we could be in deep dudu. Too many dollars coming back to the US might cause a depreciation of the dollar.
Is this a worry or will our "friends" continue to play by our rules?
2
Not knowing too much of the details can sometimes be to your advantage. I've been a fairly successful business man , and i wouldn't say i always know what i want to achieve or what i'm talking about. Personality and determination ususally makes up for lack of knowledge.
I also think that you are missing the overall goal with Trumps strategy, which is to weaken a global competitor like China, by forcing companies to start producing elsewhere.
My biggest concern with this trade war, is that he has alienated much of the global community, who might share his opinion on the bad behaviour of China, but are put off by his arrogance, lack of ethics and overall incompetence. This could lead to the longterm demise of the USA, even though that might seem far off today.
8
I agree that China has not been playing fair, especially where things like Intellectual Property are concerned. However, President Trump is backing himself into a corner with no good way out.
8
When country A’s (China) currency loses value with respect to country’s B (US)it could be either:
a) Country A’s currency became weaker
b) Country B’s currency became stronger
When the currency of all other countries, (i.e., not just China’s) dropped in value with respect to the dollar it is because the dollar appreciated.
When the US budget deficit increases, as it just did, two things happen:
1) The trade deficit increases
2) The US dollar appreciates
This is Econ 101. It is known as “the twin deficits.”
Don’t hey teach this at Wharton?
Manipulating the US currency in order to weaken it will cause:
a) Inflation
b) Capital flight
c) A race to the bottom as other countries retaliate.
10
For sure 45 is going about it the wrong way, but that does not excuse China not playing by the WTO rules now they are a large economy. The Yuan is not convertible, which any major currency should be. In fact they are now trying to make the Yuan backed by not only dollars, but also Euros, etc. The reason the Yuan is not convertible is because it would allow the markets to 'vote' on Chinese policy, and force a closer look at their books. The best illustration I can use for China's situation, are 5 ring roads around Bejing. The ring road itself is first class, but go over a block, and the neighborhoods get run down very quickly. All that being said, I think China has done a great job lifting millions out of poverty. I just don't want American workers to lose pay or jobs because of it. One thing 45's uncertainty is doing is stopping investment both there and here, which may provoke a recession faster than he thinks. His madcap tariffs also have already changed American supply chains. Our deficit with Vietnam has grown in proportion to our reduce imports from China. All of this could have been handled discreetly if we had stayed in the TPP, but as we all know 45 is the opposite of discreet. Fortunately China, tempered by historical wisdom, is more so.
3
Actually, China has been teaching the US the pitfalls of mercantilism and the US has been slow to learn.
4
I wonder what a head to head comparison of Xi's economic team and Trump's economic team would look like. In the end it be the knowledge, skills and tactics these advisors bring to the table that will steer the outcomes. That is of course problematic when you are advising Trump.
4
This reader does not think China or any other country will be teaching Trump anything. For that matter, no one or community will be teaching him anything.
Look at his response to what our intelligence community has tried to teach him about Russian interference. Or consider his denial of what the scientific community has been telling him about global warming. There are numerous other examples of his resistance to facts and truth.
Docility is not part of the Trump modus operandi. He makes Homer Simpson look like a genius.
15
I think you need to distinguish between professional economists/political economists and the ideological "economists" that the Republicans usually employ. Larry Kudlow is not an economist at all but a radical commentator. Peter Navarro is a deeply radical economist driven almost entirely by ideology rather than objective analysis.
7
Do tariffs hurt Trump himself? Or does he personally gain something from them? That's the only question that would matter to him, and I don't see it being addressed here.
2
Yes Mr. Krugman isn't it terrible how the big bad U.S. government is taking advantage of that wonderful, freedom loving, open and democratic Chinese government that is such a benevolent example of the kind of trade policy every nation should adopt.
4
@AH2
Actually it's trump's government that is hurting americans. His policies have hurt farmers so much they needed welfare. And now his latest is hurting farmers even more and he wants to give more welfare to them.
It's ironic that republicans hate welfare except when it is given to their people only.
And it's ironic that the policies he puts into place hurt his base and they still love him even as they lose more. Of course he is giving them freebies.
15
My bet is China is waiting for closer to the election to hammer Trump economically. Then the voters will solve the Trump problem for China.
11
Our only real hope of avoiding economic blight caused by Trump is that he may decide to declare victory, based on some lie of his choosing, and move on to the next debacle.
7
"...Teach Trump Economics". There's little to no chance of that happening. Let's face facts. If Wharton couldn't do it, who then could?
13
"So this trade dispute will probably get much worse before it gets better."
Readers should consider the source: the same Paul Krugman who, immediately upon Trump's election, predicted the following:
"Now comes the mother of all adverse effects — and what it brings with it is a regime that will be ignorant of economic policy and hostile to any effort to make it work," Krugman wrote. "So we are very probably looking at a global recession, with no end in sight." [That may indeed happen - years after the election. But even a stopped clock is right twice a day.]
Of course Krugman later chalked that disastrous prediction up to his "shock" on the Trump victory. A more honest comment would admit error - but that in turn would mean Trump did something right, which Paul Krugman can never admit.
1
AS a foreign student coming here shortly after WWII I witnessed the changing America and also a changing after the death of Mao Zedong in 1976. I don't think American leaders and American people really have any clear understanding about China and what was China trying to do during the past 70 years. Not China tries to teach Trump economics but more on understanding China. Chinese people and Chinese leaders have a better understanding of America because they really think and envy what's going on America after WWII. From president Truman's failed China policy how many American presidents really have a decent understanding of China and Chinese people. Americans need to take China seriously. In China every school kid must take English starting from 4th grade. By the time they finish high school they already have a basic understanding of America and they all like American dollars. So they must have a decent understanding of American economy. How many American schools offer Chinese courses? Many Chinese students read NYT and how many American people read Chinese newspapers?
17
@Tysons2019
"War is how Americans learn geography."_Ambrose Bierce
2
What if Trump's goal is to attempt to slow down the fast replacement of his beloved fossil fuel economy with clean renewables? What if coal lover Trump's goal is simply that of a crude wrecking ball trying to tear down the world economy?
What if Trump is not the loose cannon he pretends to be but he is truly the compliant marionette of the world's fossil fuel barons: Charles and David Koch, Vladimir Putin, Raymond and Rex Tillerson, current ExxonMobil CEO Darren Woods, and lets not forget Saudi Mohammed Bin Salman.
The only hope that the fossil fuel barons have to prevent their assets from turn to ashes, is for investments to dry up.
Too late, the horse of clean renewable health giving energy has left the barn and is galloping into the fossil-fuel-less future! Coal, oil and natural gas assets are doomed to become worthless toxic goo or gas to be left for ever undisturbed underground.
Trump is unable to escape from a lifelong legacy of failure from his casinos to his university and airline Trump has the anti-Midas touch. Whatever he touches it turns to ashes. Nothing can stop the elimination of the fossil fuel economy.
7
Back to checkers or more likely tic tac toe vs. chess. Doesn't anyone in his circle have a clue and influence. This currency move most likely was utterly predictable. Remember who were dealing with, the land that harbored Tsung Tzu.
3
Good luck with China trying to teach Trump economics. He's proven he can't learn from his mistakes. This is a man who, over a period of 18 years, took six tries at running casinos & ran them one after the other into bankruptcy. You'd think that after the first one or two, he'd learn. But the data says he doesn't.
187
@Tyrone What you miss is that, while the casinos went bankrupt, it was other people who lost money and the Trumps walked away with millions in their pockets (salaries, fees, etc. Trump had the casinos paying Trump-owned companies to operate them.). So while the U.S may go "bankrupt", Trump and his family will make sure they're doing just fine.
32
@Tyrone: Was there a benefit to Trump to go bankrupt all those times? Normal people might only see shame. Maybe he saw benefit.
8
@Tyrone Trump learns just fine. It is the idiots on Wall Street who kept buying bonds in each new casino, only to be wiped out over and over again, while he continued to collect licensing fees for the use of his name. This was one lesson the big US banks learned more quickly than their Wall Street cousins. Now only DeutscheBank of the large commercial banks still deals with him. Recently they paid a multi-billion dollar penalty for money laundering.
8
If, as Trump, Navarro, and their supporters claim, taking in money from tariffs is good, why stop with China? Why not place tariffs on every country and even our own companies' products, when produced overseas and then imported here? We would get rich, right? This is nonsense and contrary to the very sound economic trade policies that made America great economically in the past many decades. (That is not to say we have no economic issues, by the way.)
6
Ouch !
1
You mean the Wharton “educated” Comrade in Chief needs economics lessons?
9
@MB
I think Wharton educated is a mistake. He was ceremonially certified as educated at Wharton, but such ceremonial certification is often not the same as being educated. Economic lessons, as with any sort of lessons, would not provide any education for him. The man is uneducable. But then take a look at his offspring. (And for those who prefer ineducable to uneducable, my New Oxford American Dictionary does not recognize ineducable, but it does recognize uneducable.)
I have a hard time believing Krugman. His TDS is so overwhelming, its hard to discern where the dislike begins and the despising end. Thus, I take very little credence of what he says to be really true, in fact.
4
It is simple economics, something learned in Economics 101, not an opinion.
11
@Patrick Turner
Krugman's discussion here was rational, based on reason, not dislike. The points he makes are obvious to anyone with an ounce of sense, even if they might like Trump. That is why Trump has a hard time finding and keeping intelligent, educated people to work with him at the White House (or anywhere else, from what is clear based on his past economic performance as a businessman, which is not a pretty sight). He started with a decent slate of people except for a few (like his former minister of propaganda, Steven Bannon, who is really not bright) but has ended up with almost a deficit of intellect in the White House bigger than his burgeoning budget deficits. But then it is expected that he will bankrupt the US, because that is the only business method he knows, setting it up so he doesn't get burned (which he seems to have done here, too).
7
@Patrick Turner
Then Check out these data, if you don't believe Krugman.
https://www.msn.com/en-us/money/markets/mexico-canada-and-australia-are-winning-the-us-china-trade-war/ar-AAFAaCz?ocid=spartandhp
So, figuratively speaking, the Chinese economy has slowed from a 6 or 7 percent annual growth to a 5.8 or 6.8 annual rate. That's hardly a reason for getting upset about Trump's Chaosonomics. However, I'm deeply troubled by the Chinese halting imports of American farm products as this seriously endangers the future of American farming as it feeds us as well as the world's hungry. By Trump throwing money at farmers, it indicates a serious lack of understanding of the ramifications of his reflexive actions. Any trade considerations around the world should never revolve around food production. Hunger always triggers revolts. Trump seriously miscalculated China and China took unnecessary action that both combined were incredibly stupid displays of emotion absent wisdom.
I recommend people ignore the ignorant, here and in other nations. Focusing on Trump as he acts for the cameras should have been seen long ago as a shortsighted practice lacking strategic thinking.
It's kind of like the satirical movie; "Network". It almost seems deliberate how the movie is being played out. Just don't hurt the rambling creation of the cameras.
As long as everyone takes Trump so seriously, disasters will ensue. Reconsider your focus on him. He's having seriously harmful effects. Trump is the very definition of Sensationalism.
2
Well I see that none of the Trump cultists are even trying to defend his tweet. Instead we're hearing about how awful the Chinese government is since the Chinese people aren't free. Unlike the people of Saudi Arabia.
10
"I guess arithmetic is just a hoax perpetrated by the deep state." Aha! I KNEW there was a reason I have so much trouble with it. It's a PLOT!
6
“Why haven’t the Chinese gone all out? It looks to me as if they’re still trying to teach Trump some economics.”
Paul, that’s ridiculous. Trump is right and you’re wrong. America doesn’t need China for anything. China has been taking advantage of America. China could disappear from Earth and America wouldn’t have lost anything. That’s the truth.
2
@Mark One problem. China isn't going anywhere. And I take it from your post you're not a soybean farmer.
9
@Mark
US companies would lose their supply chains for consumer products and farmers have already lost their markets.
In addition, China could stop buying US treasuries when Trump is back to running up huge deficits. Yay.
9
The US has a short-term view, whereas China looks at a longer horizon. This is true in Asia in general. N. Vietnam thought they could wear down American patience as the war dragged on. China might be betting on the same thing now. Re: previous comment, US presidents also have to worry about the election cycle.
2
The main people to blame for US jobs moving overseas are us American people. We refuse to pay more for Made in America products.
90
@kj Wrong. It's American companies that have chosen to move manufacturing to China and elsewhere. And for good reason, i.e., to stay competitive with global producers.
10
C.L.S. You just said the same thing. Moved overseas to take advantage of cheap labor, because people want to pay the lowest price possible when they buy something.
20
@C.L.S.
...because, as @kj said, the American consumer will almost always choose the cheaper item, often regardless of quality, and certainly regardless of where it is manufactured.
If we're not willing to recognize that our buying habits are ultimately the engine pushing for lower and lower prices, we are giving up the best source of power over the situation that we have.
19
Also, Xi doesn't have to worry about getting reelected.
If Trump were capable of learning he would have done so long ago. No, he is nothing but a common racist born with a lot of money. His greatest talent is blaming others for his own faults. His greatest achievement as President is to remain silent for a full minute. It was on September 11, but still, it was the high point of his presidency.
7
China is a huge country with vast resources. It was used as a supply chain replacement for Japan, but is too well armed to push around in the same way. George W. Bush told the Chinese to devalue and they refused.
Opinion - the Iraq war is best explained as a US attempt to constrain oil supplies that were flowing to China. That approach failed.
So now the US is constraining Iranian and Venezuelan oil and pushing its companies supply chains out of China. It is also using the Ronald Regan to signal that it is serious about resisting China's push into the South China Sea.
Trump's economic strategy makes some sense when seen as a way to pressure our companies and weaken China's economy long term before the One Belt One Road initiative makes China the center of a near global network, that will weaken the US.
All conjecture, but makes more sense to me than what I understand Paul Krugman to be asserting today.
2
I agree Trump has gone about this all wrong, but it almost seems like you’re saying it’s futile to try to confront China on bad trade practices. How do we push to a trade policy that reflects our values? As you’ve often alluded to, morality and economics are entwined. Obviously China does not reflect our values so how do we push for a more just system where all people have freedom from want? When the next President comes we will still have these questions, Prof. Krugman I hope you provide the answer.
3
Not scuttling the Trans Pacific Partnership was one way to confront China, but the current administration was more interested in making sure to do it his way instead of working with other countries in a concerted effort.
7
Act in concert with allies.
Blinded By The Light & Boom In The Supremacist Echo Chamber: Yeah, let's make our economy red meat so the 18th Century-attuned Trump base can show "those people" what Yankee grit and determination looks like. Whoever thought such a meticulously thought-out plan could ever be concieved by MAGA intellectuals and deep thinkers?
1
Here’s the lesson China is teaching Trump, “There’s no cure for stupid”. And it’s the lesson that won’t be forgotten for a long time. Just look here, about a year and a half after imposing international tariffs on steel and aluminum, the actual production in steel output in the US has decreased. Aluminum production has increased due to only one aluminum smelt was in operation when the tariffs began, A year-over-year comparison of both steel and aluminum prices shows that by mid-August 2019, prices for both commodities have decreased by approximately 15%. Tariffs net effects are price increases, so when the domestic prices rise, due to the tariffs, anticipate demand to decrease and supply to increase, lowering prices. That’s just what happened, and it seems to be occurring on a global scale according to the Federal Reserve Open Market Committee assessment. With the US holding 40% of global economic activity, it’s little wonder increased prices in the US would have an effect on global figures. It’s a little early to measure the overall effects of the tariffs, but the general conclusions cast a pall on economic developments domestically and internationally. So we have to ask, What is China doing to harm itself as Trump continues to do here? Krugman’s answer, economic measures to balance and counteract Trump’s nonsense.
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the opening by nixon to china had a two fold purpose. first as a cold war strategy to isolate russia and move china away from its influence. as the first strategy seemed to be working the second, to move china away from its totalitarian communist political and economic system was implemented. by increasing the wealth of its citizens and creating a more capitalist oriented economy the theory was that this would make china more democratic. this second strategy has completely failed, and its failure has had the effect of reversing the success of the first as china and russia are renewing ties. the hold of the communist party in china has actually increased, and with the advent of modern surveillance technology is more intrusive than ever. while the political strategy failed the economic aspects of it did not. china is on a path to become the largest economy in the world. much of that new wealth is being used to increase the size and technological advantage of its military. the US economy can absorb and adapt to the cessation of trade with china. hopefully the chinese economy can not. we have until 2047 to tame the chinese beast. if we do not then once the chinese take over hong kong they will move on to taiwan, and their pernicious influence over asia and africa will be impossible to counter.
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China is actually teaching Trump about politics. That is, its huge burden on him and its minimal effect on President Xi. Nothing significant will happen until China senses how the 2020 elections will play out. Guaranteed.
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"And he vastly overrates his ability to inflict damage on China while underrating the damage China can do in return."
Prof. Krugman - that statement above encapsulates our whole dysfunctional relationship with China. Why are we in this position in the first place? Had Nixon known that one of our brightest economists would make such a statement 50 years later he never would have "opened" China to the US.
We have to return to semi-autarky and stop the de-industrialization of the US. We have to stop trade based on labor costs and lax environmental regulation. We should be able to walk into a store and buy things made in the US.
Only goods that cannot be made in the US, such as bananas or French wine, should be imported without restriction.
Why do we want to become a third world nation where we only sell bulk commodities to a first world nation like China? (folks that's sarcasm).
When we make things at home, two good things happen: our GDP rises and we create higher value-added, middle class jobs. In addition, expertise in production stays at home.
The jobs we are creating now are low value-added, like retail or home health aides, as manufacturing dwindles.
Low-priced Asian goods are a false god. Yes, if we make things at home, like we did 50 years ago, prices will be higher. But so will wages, so it will be a wash, but with higher GDP and more jobs, which is a net gain.
The only people who benefit from trade with Asia are the plutocrats, like Mitt Romney.
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If you want to understand Krugman’s economic doctrine, you have first to find out who the president of the USA is.
The same policies that were great under the Obama Administration are terrible now and otherwise.
Of course, the tariffs placed on the Chinese imports will make those goods more expensive here in America, but will encourage the companies to move their factories back to the USA, thus helping out the US workers in the long run.
When the Republican lawmakers enacted the legislation helping the global corporations export their manufacturing to China, it was hurting the American middle class.
When Trump is trying to help the working class, in contrast to the GOP priorities and his notorious vilification by the liberal media outlets, he gets a zero credit in our free press.
Trump’ problem is that he cannot advertise this move in order not to alienate the GOP donors...
Basically, Krugman is stabbing in the back a leader fighting for our workers at expense of the consumers...
The cost of this Trump policy is spread on every American, thus minimized, in order to help those affected the worst, our workers.
That’s one of the basic principle of the Obamacare...
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1. The notion that Trump gives even a small rat’s about working folks is laughable, or would be if it weren’t revolting.
2. No, what you need to understand what Krugman’s saying is a basic grasp of economics, numbers and reality.
3. Last I checked, FOX, the Beacon, the Washington Times, the Blaze, Breitbart and a long, long list of others are part of the Free Press.
They kiss Trump’s ample fundament on a daily basis.
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@Robert
At least Trump addressed the concerns of the working class in 2016. That's how he won elections. Unfortunately I don't have your abilities to read Trump thoughts. Since I don't follow the rightwing press, are they supportive of the imposed tarrifs?
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@Robert
Are you telling us that the Democrats under Obama Administration have increased the taxes on the wealthy Americans and used the money to support the working class?
Did maybe Krugman advocate such a move?
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Be afraid, be very afraid.
U.S. exports all time high;
10-year yield all time low;
Unemployment all time low;
Equity markets all time high.
Tariffs aren't working!
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Your reference to 10 year rate is apt - apply that time frame to all the other variables you cite and I think you'll see that trump inherited this great economy.
China is in it for the long haul and probably relying on false associations about tariffs like this one to wait out the US.
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@Tim I don't know what causes you to say that US Exports are at an all time high, because in the Agricultural sector they certainly are not.
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It is ridiculously untrue that US exports are higher than they’ve ever been.
https://www.census.gov/foreign-trade/balance/c0004.html
The other stuff’s worse.
His trade war like all things Trump reminds me of the final scene in the film Fight Club where Edward Norton's character stands on the abandoned upper floor of an office building, watching the other buildings on the city skyline explode and collapse bringing to fruition his "Project Mayhem".
We can only hope that after all the damage yet to come from this reality show president that we can somehow hit the reset switch as well.
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With each passing Trump international trade folly, I would love to find out exactly what macro and micro courses this self-declared “genius” took at Wharton and, more to the point, what were his grades. It is impossible to comprehend that he studied anything beyond an introductory high school Econ course, which he probably flunked.
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None I would guess beyond intro. He will have to stop threatening Penn before we can see his grades
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As The Boss sings: "We've given each other some hard lessons lately. But we ain't learnin.'"
Let's say you protect an industry with tariffs. The consequence is that consumers spend more for protected industry goods, but have less to spend in other industries, costing workers jobs in unprotected industries.
And since you have more workers in less competitive industries, your overall economic productivity suffers, slowing growth, as GDP is a function of output per person (productivity) and number of workers. Since GDP is also income, we all suffer there as well.
I suspect this is more of a political game than economic, trying to show he's with U.S. workers facing international competition. We're better off raising taxes on the rich to help fund education, training, and early retirement for those workers.
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Krugman provides excellent reasons why China is unlikely to capitulate, but the ultimate nail in Trump's trade coffin is that he will be out in max five years. Xi meanwhile is under no election pressure and can simply wait it out until the stable genius is gone.
Also, the Chinese culturally are much better able to tighten their belts than Americans.
Trump simply cannot win his trade war. The best he can hope for is to negotiate a return to the status quo ante and call it something different, as he did with NAFTA.
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I am employed by a high tech company that manufactures unique measurement equipment. The Chinese market is an important source of revenue. Not unexpectedly, our products are now subject to 20% retaliatory tariffs.
The result? The Chinese customers we serve have been directed by their funding agencies to: 1.) look for European or Chinese suppliers, 2.) postpone purchases, or 3.) demand for a 20% discount to cover the Chinese tariff short-fall in their budget.
The impact? Hopefully only a 30 to 50% decrease in revenue from the Chinese market and only a limited number of lay-offs! (Perhaps we could even apply for some of that soy-bean farmer compensation!)
Trump-onomics sure works negatively for this US manufacturer. Time for a Trexit!
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What the Don hasn't figured out is that the two economies are philosophically and organizationally quite different. The Chinese have an infinite amount of time while Donnie only has 451 days, if that, and counting.
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The more I read your economic "analysis" with all its contradictions the more sure I am that Trump will win -- you defend China which is beating Democracy protesters in Hong Kong, claim that they do not manipulate their currency, and that we have no clear demands despite direct statements regarding true free trade and intellectual property theft. Your desire to craft any argument to make Trump does not make him look bad, it makes someone else look bad, any idea whom that may be?
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While I agree on almost all on, or at least give a benefit of the doubt on anything Prof. Krugman writes. (After all, he is a Nobel Laureate, I wonder here he is overestimating China's strength - Letting Yuan fall will likely cause a noticeable capital flight, which I'm not sure the Chinese government can stop without some degree of capital control. They already have relied heavily on domesitc constructions to prop up their economy, so doing more of those probably won't help much in contrast to the US where any investment on infrastructure would pay dividends for generations to come.
Last but not least, since Xi declared his intention to hold on to power semi-indefinitely, any loss of confidence in his management of the economy will lead to political instability.
He, as with many other dictators in the past, effectively bet himself on the continuing growth of the economy. Any dropoff is potentially fatal. I've seen this personally - I grew up in South Korea in the 70s and 80s.
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My concern is not so much with the size of the tariffs, but the validity of the amounts. If an 'ideal cost economist' calculated manufacturing was getting an unearned enrichment from a government, why would it be unfair to try to estimate the 'unfair' price component and compensate as a tariff? Are tariffs always wrong?
Mr Krugman, while what you say makes general sense, I am disappointed that you don’t address the most intractable problem of all—the Chinese cultural belief that it’s ok to steal our intellectual property because we “refuse to share.” My Chinese MBA students were at great pains to explain this to me and my American students recently in class. And I think they correctly surmise that there is no court of international law that can enforce a judgment against that theft in a world where the US as well as others just ignore judgments against themselves made by international tribunals. It seems to me to be vexing beyond solution. International observers in China to verify promises? About as likely as Chinese observers in the US. Give international law some true enforcement mechanisms? Not happening. Trade war peace? It’s in neither country ‘s DNA. It will take great statesmen and women just to put our Humpty Dumpty economic world back together again until the next fracture emerges.
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Why are all the elites wishing for the end of the US this week and the takeover of China? Please remember that human rights don’t exist there and they would not let some guy name Paul write whatever he wants. In fact only state supporting voices can ever be heard if you don’t want to end up disappearing in their closed judicial systems.
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@Gregory I feel your are being over sensitive to criticism of Trump and his policies. This article does endorse or support China. The writer is stating his opinion that Trump's tariff policies will do more harm to the U.S. than to China.
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@Gregory
No one is rooting for the chinese, only pointing out that the chinese play the economic game far better than clueless trump.
Unfortunately trump will continue with his failed policies and keep hurting americans.
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I'm concerned when someone says, The Billion Dollar Loser would have to learn X. I'm not being facetious - it may be difficult or impossible for him to learn new things.
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There is no answer to Trump's peculiar economics or his madness. Trump is a legend in his own mind.
Paul Krugman is 100% correct in everything he says about Trump. Trump believes he is correct and the world is wrong. If you're on his staff and disagree with him, well, then, "You're fired!" Just like the TV show Trump hosted.
Everything that comes out of Trump's mind is a lie. Trump exaggerates, bullies, has fits of anger, denigrates everyone, and generally promotes chaos and discord. But, in his warped mind it's beautiful, or the best, or wonderful or some other worn out trite adjective.
The trade dispute will get worse. China will not be left a smoking ruin but the U.S. will certainly feel a lot of pain for a long time. The farmers will not easily recover. Nor will other industries hit by Trump's angry tweeted tariffs.
I hope the next President will never tweet again. We can't shut this one off. The best we can do is elect a new President in 2020 and hope we can undo some of the damage.
PS: We should keep in mind though how China took advantage of American policy, politicians, trade policies and everything else that enabled China to rise to power at the expense of millions of American workers. We sowed those seeds. We can't continue to do business with China as we did in the past. The cyber threats alone could be devastating. America needs a new direction and new China policy.
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China sell four times as much to the U.S. as it buys. I do not think there is much produced in China that cannot be produced with cheaper labor in India, Vietnam, Indonesia, and many other places across the globe. China is now offshoring. Why should we use them as an intermediary. The Chinese simply do not want outsiders to have access to their consumers. We don't need a trade war with arrogant China. We need a trade divorce. And good riddance. Short term pain for long term gain? Maybe, but worth it. In my opinion, this is just about the only thing that Donald Trump has done right. And it is one of the few things I think Paul Krugman is wrong about.
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Trump and his supporters are supporting Trump's tariffs because they are called tariffs. Call them taxes--which is what they really are--and his supporters will realize their folly.
After all, remember the TEA Party stands for "Taxed Enough Already."
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Trump's views are incoherent and his demands are incomprehensible not because he doesn't understand the basics of the economy, but because he only deals in soundbites designed to appeal to a fan base that apparently can't separate facts from the distorted piece of fiction known as Trump. A guy living large on fraudulently obtained personal loans, criminal activities, and the taxpayer's nickel could care less about America, the economy or anything else that doesn't enrich himself further. He's led his whole life on scams and stiffing honest people, so why would he stop now?
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Mr Krugman do you know the trade deficits we have with china???
2015 365 Billion dollar trade deficit with China
2018 419 Billion dollar trade deficit with China
So finally we have a President That is calling out the imbalance and calling for fair trade and Krugman is complaining.
Frankly, previous Presidents should have taken a stand.
This is one more reason that he will win 2020 he has guts.
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So Trump gets elected; our trade imbalance with China jumps way up; this proves Trump’s a genius.
Okay, sure.
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Look up “twin deficits”. Our trade imbalance is closely related to our budget deficit. You can’t change it with tariffs, although you may be able to transfer the trade deficit to a different country. Trump’s budget busting tax cut will make the trade deficit even worse.
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@NS
"Frankly, previous Presidents should have taken a stand."
Have to go back to the Reagan era to make that correction...his admin started the entire system. And the GOP did not want the stop China from providing cheap labor--profit before intellectual property rights. The horse left the barn a long time ago.
I honestly think the Chinese are holding their firepower so as to crash the U.S. stock market next summer. Doing so now would give the Unstable Narcissist time to take countermeasures, which would be self-defeating for China.
The Chinese want to give him sufficient rope to hang himself, and at a time of their choosing.
Bravo China! You will be doing the whole world a huge favour, and maybe we can all celebrate together afterwards.
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It seems that Krugman believes that short-term economic gain trumps long-term geopolitics. It does not.
For many years the consensus was that we should ignore the wholesale theft of American technological know-how, harassment and blackmail of Western companies, dumping, spying, steady military expansion and bullying of neighbors in order to protect short-term profits. An egregious case was when General Electric agreed to for over the design of their new train if the Chinese agreed to purchase one locomotive.
This is not about trade at all. It is about China's aim to become an expansionist hegemon whose objective to militarily challenge and threaten the West . Why should we help them, Mr. Krugman?
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@Kai
Your view reminds me of cutting off one's nose to spite your face. His policies are hurting americans more than the chinese.
The farmers have had a ten billion welfare check handed to them. And then trumps the ante and hurts them more. But the good news is another welfare check for them.
All while the rest of us pay higher prices. And no welfare check.
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There may be another reason that the Chinese have gone relatively easy on Trump -- they want to see him win again. Trump's been, on the whole, absolutely great the Chinese -- withdrawing the agreements and long-standing relationship leaves vacuums that they are just pleased as punch to fill.
Like Jeff Bezos patiently waiting for decades to raise Amazon's profitability, the Chinese are buying marketshare in the minds of millions with its soft -- and once marketshare is given back, it is exceeding difficult to get back.
Trump - MCGA!
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Trump is 100% right about China. If anything, he’s being too soft. The well-being of American farmers is not dependent on China or the Chinese people. You don’t need a Ph.D in economics to know that. You only need to look to what’s going on in Hong Kong right now to know everything you need to know about China.
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@Mark
I think that you should listen to the farmers who are saying the opposite. They just lost their market and china is buying from other places.
Which is why they were given a ten billion welfare check and another welfare check might be on the way.
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@Mark
The well-being of American farmers is being artificially propped up with welfare money from the Federal government -- you know, socialism.
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Trump has praised how China is handling Hong Kong.
Import tariffs are a sales tax. We pay the tax when we purchase imported goods.
Because poor people spend a greater percentage of their income than the rich, sales taxes are very regressive.
I guess that's what the GOP wants. Increase taxes on the poor while reducing them on the rich.
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I'd like to hear what Krugman thinks the effects would be, in theory, assuming full feasibility, of splitting the currency exchange rates of nations into 2 separate rates, one for investment and the other for consumption. Please don't just blow it off due to a misperception about feasibility.
I think it's a messy proposition, and I wouldn't suggest it unless I believed it would have the effects I think it would have.
I believe if this were coupled with the democratization of foreign investment, that is having citizens of the nations receiving foreign investment to have a democratic voting power over them, could settle a lot of the current world turmoil that our haphazerd system has created.
Right now in my mind, the model I'm thinking of, this really allows countries to form the communities they want to have while respecting the realty that capitalism is a necessary part of the system. It just needs some direct feedback, in the form of voting power, when it crosses political boundaries.
We can't force nations to have democratic elections, but we can condition foreign investment upon the vote of the population of nations on allowing that investment.
Do you think I'm on to something big and peace-inducing here?
Paul, Seems to me that the USA is in much better shape than China.
Why would Trump need a lesson from China?
Do you think the folks are happy in China?
I don't think so.
We are happy here.
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Hello Jo Paper. Have you been to China recently and seen the massive investments in infrastructure they are making? And they are moving ahead at warp speed on G5 internet and artificial intelligence while we argue about gun control and our president continues to stir the pot before leaving on his golfing jaunts. You would not be so happy if you really knew what was going on.
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Well put Paul. Trump really has no idea how his bellicose tweeted positions will affect anything. Mostly by acting "tough" he is making America feel great again. At least the Americans who would follow him over a cliff.
The "trade war", the "immigration crisis", the attacks on members of Congress, the attacks on cities themselves (!) are all part of the drama he likes to create. It takes our minds away from his corruption, his treason, his complete lack of contribution to the nation. What programs to help Americans has he proposed other than than tax beaks to the rich?
How are our roads and bridges? How has our healthcare system improved? How has our education system advanced? What if anything is better since January 2017?
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The farmers don't seem concerned about losing the Chinese market because they think Trump will print more money and bail them out. They think China bashing with tariffs is a great idea. That's why they still support him.
Now that Peter Navarro is Trump's Chief Economist, I wonder
when Larry Kudlow will be leaving.
3
Less than 20% of China's exports go to the US? I clicked through to the WTO page but it only reminded me of what I knew already.
Hong Kong, counted separately, greatly skews the figures. I don't think 13.7% of China's exports end their journey in HK - they get trans-shipped. There are a variety of reasons for this - which I'm familiar with since I lived and worked 6 in Tokyo and my wife is Chinese from SE Asia.
I think we can safely take and assign, say, 6% each to the US and EU in which case the US is now 24.4% of all Chinese exports, and the EU is 20.2%.
The US is China's single most important export market and it's sort of astonishing that China exports more to the US than to the EU which is just as wealthy and has 50% more population than the US. Moreover, (in addition to my wife being from Malaysia, I worked also in Singapore), a lot of the Chinese goods that go to say SE Asia are, for example, intermediate goods, where the final markets for the corresponding goods are either in the US or Europe.
You're always talking if not your book Paul at least your agenda. And, who knows, maybe you're talking your book as well.
2
Someone needs to teach the economists about geo-politics.
Had we been thinking about geo-politics then we would NOT have outsourced all our industry to China.
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@scientella
How would we have stopped it? American corporations have been going overseas for over 120 yrs. They have always gone after the cheapest labor and overhead costs.
It is why we have an empire, cheap goods for consumption by americans.
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Any American who lost his job to a factory in China had an employer who made the business decision about where his factory would produce that item. Same for jobs sent to Mexico, Canada, Vietnam and elsewhere.
The same story is true for all of the manufacturing jobs that left the North for lower labor costs in the US South.
Maximizing profit and shareholder return is the only "meaning of life" for corporate persons.
China, and its people, have lifted themselves out of poverty in just two generations. Illiteracy is gone. Starvation is gone.
Currently, in China 9% of Chinese hold Bachelor's degrees (126 million) while the US has 32.5% who are college grads (106 million.) In 2016 China had 23.7 million regular high school students most of whom would continue in college (94.5% admission rate.) https://www.quora.com/What-percentage-of-Chinas-population-has-bachelor%E2%80%99s-degrees
The greatest natural resource of any country is its people. Human development is the ticket to a better future. The US holds a slim lead over China in new patents. We burden our young people with heavy debts for college and that huge debt discourages many of them from pursuing further graduate level educations. Beyond debt, too many of our "best and brightest" seek their fortunes on Wall Street regardless of developing their best talents.
And why not? Starting STEM salaries are $66K, Wall Street $70-$150K. Do the math. Choose.
Who will win the future?
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I disagree on only one point. Having done business in China for many years, I believe that the Chinese are simply waiting so that their stronger response has maximum impact and is most effective for their purpose. Yes, they are sending warning shots, but they recognize the personality by now. China is not impatient, as we Westerners are, requiring instant personal gratification. Their culture is thousands of years old, and they are both strategic and experienced in manipulating westerners.
Your article is excellent and I totally agree on every other point.
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While it's true that the trade war has yet to produce a real concession from China, Mr. Krugman neglected to mention that China has problems of its own that limits any drastic retaliatory measures, namely a large property bubble and soaring public and private debt levels. Most likely this will just keep dragging on and will only get resolved when the next president takes office.
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"the first thing you need to realize is that nothing Donald Trump is doing makes sense." Since when politicians do anything that makes sense to everyone. I live in the Bay Area, California, a BLUE state. I never tried to make any sense out of what Trump, or any of his predecessors for that matter, did until I visited my relatives in Manitowoc, Wisconsin. My cousin and his wife were asked to train visiting workers. Guess what? Their company was on its way to China and India. Both of them were unemployed ever since.
Does it make any sense to have Donald Trump in the White House? It depends on whom you ask, where you ask the question. Let's wait for the answer again in 2020.
5
US workers are competing with countries who pay their workers $2.00/hr...want to “even” the playing field? - lower wages/benefits for US. 🙁
No US politician who wants to remain in office will ever admit that.
4
Trump's economic strategy is hiding in pain sight. He has used it in bankruptcy after bankruptcy his entire life. Run up the debt to the highest level possible with your creditors (our largest trading partners, who historically have been our most dependable allies), then stiff them by changing the terms and threatening them with tariffs. The real question is can we get away with it without pummeling the world economy?
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@bill4
The answer to your question is most likely “no”. Only more chaos worldwide as the world continues to heat up.
By Balkanizing itself and failing to adopt the Metric measurement system, the US lost its place as the leading manufacturing center. It is nobody's fault but our own.
6
You believe that failure to adopt the metric system is what led to the downturn in manufacturing in the US? Not lower foreign labor costs, reduced logistics costs, increasing globalization of the global economy?
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@Steve Bolger
For decades following WWII, we were the leading manufacturing nation. We use the English system of measurement and mostly still do. Long ago, Congress created confusion that remains to today after they assumed responsibility for making a monumental change in America by mandating the metric system that is now dividing engineering and leading to serious mistakes including a major satellite mission that failed after the two systems of units were confused dooming the mission. Congress is largely comprised of Lawyers. If you ask a Lawyer to make an engineering model change or a medical decision, it goes predictably wrong. I prefer English because the nation and everything built in it is based on the English system. But then again the materials of the world are here as well. There will be more errors. I can only hope, minimal ones and that we adapt to a dual existence. So too, the world must adapt to a dual measurement system. Not just us. Then we will all be interchangeable. It's a technology evolution thing.
3
"So this trade dispute will probably get much worse before it gets better."
Casinos, steaks, universities, etc. He ruined them one at a time. Until he realized he can screw up ALL AT THE SAME TIME!
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A malignant narcissist that occupies the White House, has not and will not listen to any sane advice from his aids. When he looks in the mirror, every morning and hears the words "you are the most beautiful of them all" , there is no hope of Trump taking ANY advice seriously...who can question a demi-god who knows EVERYTHING...
7
And who has to keep repeating into hungry tv cameras, “I am a very smart person” in the hope that repetition will turn a lie into truth because it’s worked so well his whole life.
3
Why would the racist in the WH listen to anyone? - he already told us he “is a very stable genius”.
3
Most of the GOP support never hears anything bad. They will turn off the TV or claim fake news. Some of the 80's crowd still believe climate change is a hoax. These same people are upset about changing America from the white one they know to the other one they are scared of. When white people are scared minorities should be on high alert.
Same as it ever was, sadly!
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So Paul, how do you really feel?
1
Let there be a trade war. It’s time to disengage from China. Our policy toward them has failed. They are an oppressive dictatorship who are putting people in concentration camps. We have no good reason to do business with them.
1
It would help if our allies got on board, but our “very stable genius” burned those
bridges.
1
Definitely disengage, like we did with the Japanese in the 1930’s.
1
Please, someone, please, please, install a holodeck in the WH basement so trump can live a happy, virtual life. And never disrupt OUR lives again.
He never will learn, and lives a life in his narcissistic fantasies already, so it will make no REAL difference to him.
6
This is what comes of electing a lazy and ignorant president.
Dishonest Donald knows nothing, but thinks he knows everything, a very dangerous combination.
11
Beautiful column!
1
Similarly, trump's presidency is a learning moment for Americans.....
If we don't take our precious citizenship more seriously, we will lose it....
NO MORE TRUMPS !!!
5
Why doesn't China just bribe him like everyone else?
2
I certainly don't root for a decline of the American economy, and I appalled at my own stoicism that a recession (or worse) would at least wake us up to the fact that the colossal stupidity of this U.S. president will have consequences for which we must eventually pay.
Climate denial, racist tweets, degenerate behavior, subversion of meritocracy, corruption, disrespect for institutional protocol, anti-intellectualism-- all of the hallmarks of Donald Trump have surely had consequences over the past couple of years. The link between his hateful anti-immigrant rhetoric-- not to mention his policies-- and the mass murder last week is clear enough for anyone with eyes to see. But the willingness of Republicans to make plausible-seeming excuses, to discount his toxicity, is a source of utter frustration for people on the left.
At least in economics, consequences are not as remote from their causes.
11
Trump's understanding of economics is that
he needs to win re-election in 2020 to avoid going to jail for obstruction and possibly other crimes
he needs to maintain his base and discourage others to win re-election
his base is a coalition of the ignorant (he loves the uneducated), white supremacists, the religious right, Republican benefactors who benefit from tax cuts and deregulation, and politicians who benefit from Republican benefactors
he can say anything to the ignorant and they'll believe him
he doesn't need to get a good deal with China (or Iran or Mexico) he just has to show his base that he is tough and say that he won.
if Trump wins reelection he stays out of jail and can continue to violate the emoluments clause and accept bribes
That is all Trump has to know about economics.
14
Thanks for the easy to understand education on economics, professor. I would add that when one's economic education consists of lying cheating and stealing, and getting away with it, one's views are irrevocably distorted.
6
Always spot-on.
Luckily for the current occupant of 1600 his supporters are too clueless to understand what is written here, so they will go on loving the tweets - right up to the moment the bottom falls out. They will never know what hit them.
6
Not only Donald, the-reality-host (actually "the unreality host"), is unfit and is clueless, but his advisers are also delusional about trade war and China.
China is under the dictatorship and controlled tightly by the central government, just like North Korea, even though it has a more open market-based economy.
The backbone of China's economy is the government owned enterprises (GOE), which used to be government bureaucracy thirty some years ago. These GOE even today are there to provide jobs and maintain control over certain business such as telecommunication, banking and etc.
When Donald wages trade war against China, the effect is felt mostly on Chinese private companies who do assembly work for U.S. companies as a part of their supply chain. So any tariff paid are actually coming out either from U.S. business (like Walmart) or consumers.
Yet, U.S. demands China to reform its GOEs, which were not even hurt by the tariff. How absurd is this trade war?
Anyone who understands China will just laugh at this bunch of idiotic "Donald's Advisers" and obviously it is why the trade war is going nowhere and it never will...
Make God bless us of all if the Democrats can impeach this Unreality-show-host, Donald, so we don't have to pay this "tariff tax" to Federal government any more.
Nothing the China does will break through the calloused, ossified ego of trump. It has proven to be impenetrable.
4
I pray they crash our market. Could pick up some bargains. Pity about the farmers....
Trump wants to win at all costs and really only cares about any economic disruptions that will affect him or him personal interest directly. Everyone else be dammed.
Combine that "win at all cost for him" mentality with his economic ignorance and overconfidence and you can see the writing on the wall - a blood bath for American Agriculture and many other industries that rely up on an interdependent global supply & global finance chain.
7
Last week Science magazine had another collection of articles on science in China. They are close to matching us in DNA engineering with CRISPER, and possibly ahead of us on DNA engineering with plants. They are in a race with us for the world's biggest and fastest supercomputer, in which they are sometimes ahead of us, sometimes behind.
https://science.sciencemag.org/content/365/6452
I heard a conference organized by Nature, the UK/international science magazine.
A panel of business men and politicians said, China is competing with us.
A panel of scientists said, China is competing and cooperating with us.
I'm happy to cooperate with China. The Chinese are smart and hard-working, with a good sense of humor. Chinese teachers and colleagues have taught me some of the most important lessons in my career.
I welcome a Chinese Sputnik, which will humiliate the US, demonstrate how far behind we have fallen (with our anti-government politics and corruption), and shame us into improving our education system and respect for science -- as we did in 1959.
Science has many important challenges. We can use every hand we can get.
Qi lai!
7
@Norman: The US has lost much of its capacity to think outside the box.
reality to China: trying to teach Trump anything is a waste of time and effort. cut to the chase and try something he understands and that might work: a bribe.
5
"...We, on the other hand, can ruin your farmers and crash your stock market..."
Readers - this is a wonderful example of false consciousness. Krugman often utilizes this tactic to influence readers and threaten our perceived well-being.
Still in the opinion section, Paul?
3
China will win the trade 'war'...with the help of the US People's Democratic Party should they win 2020. If they don't win, however, it's game over for the Chinese. World War III will be fought (and won) without firing a single shot!
1
China is in no position to ruin American Farmers
https://www.ers.usda.gov/webdocs/Charts/92938/trade_fig05_350px.png?v=8639.5
And exports are about 20% of the US farm product market
1
Sometimes if you want somebody to do something the best chance of getting them to do it is to demand they do the opposite.
1
a weakening stock market would take a lot of hot air out of Trump's balloon. But don't bet on it. The US economy is still outpacing most of the developed world--even more so now, with Europe, Japan and UK showing flat-to-negative growth. Bond mkt yields are zero, or negative in those countries. Where else will the money go? Into the US stock market, ironically. Look for another 15-20% rally in the S&P over the next 12 months.
It's ludicrous for anyone in the administration or Congress to be upset or adversely surprised by China's technical ambitions. China has been training quality engineers for decades, thereby transforming China's transportation system and infrastructure to be the envy of the world. Just like us and the emerging Japan and EU countries post WWII have peddled their products and increasingly high-tech stuff to an eagerly buying international clientele. Why shouldn't China do it? Of course they are taking shortcuts by illicit means, greatly facilitated by advances in computation and the sloppiness by many in not adequately securing their websites and surveillance. We and others have also weaponized the internet, it is now user beware!
China has been ambitious to become the world's eminent leader in the emerging technologies of AI, quantum computing and encryption, automation and robotics, etc. and is building the global infrastructure to assure dominance. China is spent about twice as much in R&D in 2018 as the US. Its investments climbed from less than 1% of it's GDP in 2000 to well over 2% nowadays, whereas ours has basically been stagnant in the 2.6-2.8% range over the last two decades. Our world dominance in STEM fields was based on vigorous R&D investments in the 3-4 decades post WWII. We have to resume this spending to counteract the Chinese rather than complain about their initiatives. We still have many of the world's best universities and labs- but for how long?
4
If I were China, I would feature Ivanka's purses at the "Third Annual Exhibit of Excellent Trans-Oceanic Conjoint Success". Paint a giant portrait of Trump on the Great Wall. Make Eric the Honorary Mayor of the 5th township of Baizheng. Buy the 666 from Jared.
Just stroke Trump's ego or personally enrich him while not actually do anything that benefits America. He'll probably buy it.
3
Good article by Mr Krugman- but so many people making comments have little depth of knowledge of the issue. Claiming TPP was somehow going to contain China or force it to the US will makes no sense. China already has free trade agreements with a fair chunk of the nations in the bloc. It is also behind the upcoming RCEP - which will be the largest trade agreement in the world - even if the US had stayed in the TPP. The point is - apart from 2 or 3 European countries the rest of the world is not picking sides. They want to trade with both China and the US.
So many people believe false things. Such as claiming we have a big enough consumer market while China is only export oriented. Again - people seem to be 10 years behind. 28 million cars were sold in China last year while 17 million were sold in the US. In recent years Buick and Cadillac have sold more in China than here in the US. Without those sales both companies would probably be out of business. People need to read more updated and more wide ranging news of the world.
The best strategy would be to take a hint from Germany. The Germans negotiated with China behind the scenes instead of trying to bully them. Guess what - German companies can now have fully owned subsidiaries in China.
4
The lifting of trade barriers worldwide, primarily through multilateral agreements and the shift away from an industrial economy to one much more oriented towards technology and services, has allowed America to have a combination of low unemployment and low inflation.
Some politicians from both parties, oppose free trade for the explicit purpose of reversing the shift away from an industrial economy to one much more oriented towards technology and services, that has taken place. Thus, they are actively trying to sabotage the very things that have brought us the ideal economic environment of low inflation and low unemployment.
Peter Navarro, Bernie Sanders and Senator Sherrod Brown (D-Ohio) who are prime examples of the "progressivism of fools" branch of protectionists. The only objective of tariffs supported by those protectionists, is to transfer wealth to the employees and owners of favored domestic producers.
Trump seems to be the most dishonest protectionist one. The worst lie is not that China pays the tariffs that are actually paid by American consumers. The even worse lie that is being accepted by many in the media, is that the pain to American consumers and farmers is worth it, because in the long run, we will be eventually better off because of the tariffs now. The exact opposite is the case. Tariffs make the country that imposes them poorer as their protected businesses become less efficient and noncompetitive..."
https://seekingalpha.com/article/4279198
4
Another accurate and frightening analysis, but how do we get the white house or those who enable him to understand this.
The red maga hats don't get it, they got a temporary tax cut which is being negated tariffs and [to a lesser extent] inflation. The elites in our society received a permanent cut and just said thank you with a 250k per plate fundraiser.
We are now bailing out are farmers at record levels.
Rumps greatest monument will be the largest deficit [adjusted for inflation] in our history.
Meanwhile, Climate Change, Infrastructure, Healthcare, Education are crying for attention.
Soon half of every tax dollar will go to servicing debt, translation we will have to raise 2x as much as we need to function. Our children and grand children are* and if it unravels faster it will catch many of use in our retierement.
There is no maga
Let's not forget that the Chinese (a) play a long game - they are not even remotely as focused on the short term as we are; and (b) they value stability and order, two things that are antithetical to Trump. I think we can rely on China to do what they believe will inflict just enough damage that Trump loses in 2020, and rational person wins the Presidency. With order restored, they can get back to their real focus of building their own country and economy for the long term. Trump and his juvenile antics are, in their view, an annoyance.
5
I don't think Trump has had a teachable moment since he was in grammar school. He thinks he knows more than everyone on every subject under the sun, despite the reality that he is an incredibly intellectually-stunted individual. Money can buy you a great many things, but not cognitive horsepower, which he lacks so abundantly!
5
The only bright spot in this assessment is that maybe the Chinese will create a damaged US economy as the backdrop for next years election...
1
The FED and the GOP, with some assistance from the Democrats, have massively stimulated the economy. More than when the country was in the midst of the 2009 recession. Why? To prop up the economy. This is the basis of Trump's ridicules trade war. The plutocratic revolution under Trump has given the wealthiest a leader who only sees their welfare. The problem for the country is the recession that Trump precipitates will harm most people but the plutocrats win either way.
2
Thank you, Dr. Krugman.
Please keep educating us. Keep making sense.
3
If there are smarter ways to get a fair trade deal with China than what Trump is doing now, why isn’t all the smart previous administrations adopted them. The fact of the matter is, they all tried and didn’t work. If China keeps devaluing their currency, their inflation also keeps going up as the import of raw materials keeps going. In a way, either tariffs or currency devaluation will both cause inflation and people will pay for it. We have a large reservoir of consumption power than any country, we can afford to reduce the consumption and Chinese doesn’t have such an option. It is more of an export driven economy than domestic consumption based economy. We hope Trump will succeed.
3
@Kodali Yeo, the key word is hope!
1
Well, of course, nothing happened of a negative nature to the US economy, after President Nixon opened the doors to China back in the 1970's.
It was only once President Trump was elected in 2016 that things started in a negative way with respect to China.
Up to that point, every US President and every US Congress had deftly dealt with China, by following the open-doors-to-China advice of Paul Krugman. Over the prior decades, millions of Americans were freed up from well-paying but monotonous jobs in the manufacturing sector.
Freed up to pursue jobs as greeters at Wal-Mart or as guards in the prison system. Freed up to spend more time on recreational drugs. Freed up to watch endless hours of "news".
Freedom is wonderful.
5
The unspoken lever China has yet to play is statewide port closure for all North American traffic. Tariffs are meaningless when the product can't get to market. While a 20% drop in exports would pain the Chinese, it's a state run economy, and they're already preparing their citizens of further hardship in the future.
For the US, such a move would be worse than the OPEC embargo of the 70's. Extreme shortages of everyday goods, and those that can be obtained at hyper-inflated prices- which in turn forces the FED to raise interest rates, putting further drag on the US economy.
Unlike Trump's world, we live in an age of global trade, supported by cheap and efficient means of shipping goods from distant points of origin. Remove that process, and watch the world burn.
3
Worth noting that while Mr. Krugman's editorial focuses on Trump, it's actually the Republican party that is responsible for the trade war. They have chosen to enable and support Trump at every turn. They own all of his policy decisions. So while it's quite correct to blame Trump for the current trade war debacle, it's also true that ultimately the only way to solve this problem is to vote out all of the Republicans in 2020.
7
Trump's just stringing the negotiations out until next year when "the parties will come to an agreement" just in time for the election. Trump will, of course, by that time sign anything's that's put in front of him and call it a victory.
3
It has often been said that the Chinese have more to lose economically in this trade war than we do? Is this true? The Chinese don't seem to think so, based on their willingness to retaliate. Or perhaps they are willing to put up with the losses as a matter of national pride, as the Chinese public is clearly on the Chinese government's side in all of this. Regardless of their motives, this is a lose-lose situation for all parties and the Chinese economy continues to grow despite the Trump administration's propaganda to the contrary. Trump and gang are just kidding themselves if they think that tariffs will slow the growth of the Chinese economy. If the US wishes to counter growing Chinese influence, then it should build economic alliances with countries in East Asia. Unfortunately, Trump has never seen an alliance that he wouldn't like to destroy. Hence, the destruction of the TPP.
4
America's horizon is the next election, or possibly the next quarterly P and L report. China's is thousands of years. myopia?
2
Krugman writes: " China can inflict pain of its own. It can buy its soybeans elsewhere, hurting U.S. farmers."
Worse yet, is that farmers have cultivated the Chinese market for years. Losing China as a customer for even a year or two, may make it difficult to re-establish U.S. dominance in that market. If that is the case, Trump will need to continue subsidizing farmers (with our money) or lose them as a voting block.
4
Relationships with our longterm allies will not improve quickly once Trump is out of office. In 2000 and again in 2016, the Republican candidate for president lost the popular vote but slid in to office through abuses or eccentricities of the American electoral system. One by an astoundingly partisan Supreme Court case in 2000, and in both cases the Republican, having lost the vote, had to turn to the anti-democratic Electoral College for his victory.
This country gave the world the dual disasters of GW Bush and DJ Trump. We represented twice to the world that these feeble, utterly unprepared, and thoroughly dishonest white males were the very best our country had to offer. In turn, Bush and Trump gave us un-winnable trade wars with China and unwinnable ground wars in Afghanistan and, astonishingly, Iraq, which had not attacked us.
Why should any ally trust that the US isn't going to go rogue again at the very next opportunity? More trade wars. More ground wars. More isolationism. Increasingly, our onetime allies find themselves imperiled in a world led by US actions and policies. And I don't believe that they will be able or willing to continue to do so.
First, there must eventually be pushback against US isolationism and intransigence. The EU is readying itself (as best it can) to step into America's shoes. Second, mounting economic and military risks (e.g., Iran, North Korea) ginned up by the US with little apparent upside cannot be sustained indefinitely.
3
In your next column, please:
How does the U.S. whack down (best: eliminate) China's stealing of intellectual property,
obtain fair trade and investment/business practices in China,
reduce its out-sized dependence on China for vital products for our technological society, viz., computers & related products, and
assure that pharmaceuticals and other products made there fully meet specifications and are safe?
1
@JimPB
These issues apparently are not a concern of our government. Just the tariffs.
2
China is trying to negotiate with someone whose demands are "do what I want or I'll make my own people pay tariffs."
10
So many of Trump's supporters think that Trump is a genuine genius because of the chaos he creates. His style is to confuse with chaos and then reap the gains while everyone else is reeling in the confusion. Problem is the gains are only meant to be for him. I think we may be in some serious trouble here.
3
"What about a coordinated international response? That’s unlikely, "
Indeed, would not being in the TPP be the best counter to China and give our efforts far more punch?
I don't think Trump ever understood this at all. In fact, I seem to remember at one point he believed China was in the TPP.
Good grief.
2
As you watch Trump boast of his negotiation prowess with Chinese opposite numbers, don't forget that two Hong Kong Tai-Pans snagged all of Trump's Hudson rail yards properties for part-ownership in one office building that won't have a liquidity event until 2034 because Trump got caught in a debt wringer.
3
Speaking of arithmetic... Trump confuses the public with the claim that "China is paying the tariffs" and bases that on depreciation of the yuan. Economists say he is partly right. So what is the matchup of tariff to devaluation. Twenty-five percent tariffs were matched by what devaluation? I think I've read those were matched by a 5% drift down in the yuan. Add this week's weakening of about 2% and the total is no where near covering the 25% tariffs already in place or the extra ones coming in September at 10 or 25%! Is there something I'm missing or is Trump blowing a smoke screen to hide the fact that American consumers ARE paying the tariffs? A little help from Mr Krugman or any other economist out there please?!?
One has to be willing and humble enough to learn. I hope we are.
1
I am dismayed by the anti-China tone in many comments below. The UK "empire" also talked up enemies: that's what empires do. They identify competitors as ripe for a good old whipping. Pompeo gave a thorough talking to Australia the other day, suggesting we put US-planted ICBM's on our northern shores. We have so far rejected being a nuclear and/or missile-based aggressive power. Pompeo's is a recipe for a hostile act. Pity is the Australian far right Government will toe the line, again and again. Vietnam springs to mind for me, but Iraq and etc. all deserve mention.
Krugman, full marks for avoiding this imperialist talk, but I don't see why historians and sociologists aren't (surely by now) better than most economists. The latter have performed terribly over the past 40 years, particularly with austerity, the sell-out of the ex-USSR to kleptocrats and so on. With lots of copy-cat kleptocrats ruling lots of countries now, we stare at a mess. And a sociological treatment of this currency manipulation 'talk' is far preferable.
124
@Hector One possible Chinese response could be to greatly expand soybean and corn production worldwide by providing subsidized credit and capital to areas such as South America and Africa that could be used for expanding soybean and corn production. During the colonial era there were many very large farms owned mostly by Europeans in sub-Sahara Africa. Today, risk/reward profit maximizing investors would tend to avoid investing in large capital-intensive agricultural operations that could be subject to expropriation or the whims of warlords, as was the ultimately case with many of the large farms that had been established during the colonial era.
China could easily decide, either for retaliatory or food security reasons, to have its state controlled or influenced entities advance the funds needed to develop large efficient capital-intensive farms. There are many areas in the world in addition to South America and Africa that could be used for expanding soybean and corn production, if the money for modern irrigation and advanced farm equipment was made available on very favorable terms by the Chinese.
Were this to occur, American soybean and corn farmers and the areas that depend on them would be depressed for many years. Industries that sell equipment and other goods to farmers would suffer. Many point to the depression in American agriculture in the 1920s that preceded the great depression as a precipitating factor.."
https://seekingalpha.com/article/4205253
22
@Lance Brofman I'm not sure it would have the same impact today as it did then. In the '20s, many Americans worked on farms. Today it's less than 2%
Not to say that it wouldn't be bruising, especially since the US has come nowhere near to recovering from the Great Recession
7
@Andrew
I'm not sure it's accurate to correlate the economic impact of agriculture with the currently low number of persons "seemingly" associated with farming itself. The increase in agricultural productivity in this country (i.e. that the 2% can feed our population and many others as well) has been, historically, enormous. That economic activity not only includes the staggering value of the crops and products themselves but, the equipment and logistics associated with growing and moving those goods to market.
13
In the meantime, his base (and others of us) are footing the bill, eg, free money for farmers who are losing sales to China. But will Trump's base realize this come 2020. Not likely, they can't see because their "Great American Great Again" hats are like blinders.
237
@Gordon Alderink Already, we are seeing the effects of the inevitable responses to tariffs. Not only were Trump's assertions that "trade wars are easy to win" fallacious, but the country that instigates a trade war is always by far the biggest loser. The retaliating nations always have a tremendous advantage over those instigating protectionism. Tariffs on steel and aluminum increase the costs of every product made in the US that uses those metals. Thus, American consumers and producers are already net losers from these ill-advised protectionist tariffs, even before any retaliation. These tariffs increase consumer prices and make products produced in the US less competitive, relative to those manufactured goods made outside the country using steel and aluminum priced at the world market, rather than the artificially propped-up, protected US aluminum and steel markets.
When a retaliatory tariff was put on US motorcycles by the EU, mostly impacting Harley-Davidson (HOG), which will not raise any costs on any EU producers or for anyone in the EU except for buyers of motorcycles, the cost to the retaliating nations is miniscule. HOG has announced it will have to shift production outside of the US as a result of the tariffs. Thus, on top of the harm to US consumers, producers and exporters of the steel and aluminum tariffs, before any retaliation, American workers at HOG lose jobs and shareholders of HOG suffer as well. ..."
https://seekingalpha.com/article/4205253
20
@Gordon Alderink And those blinders are all made in China.
17
@Gordon Alderink
“ ... none so blind ... “
8
As much as I respect Dr Krugman, I think he's missed the big picture.
China is bluffing on the trade war and they know it and Trump knows it.
They don't want to raise the rmb or they appear weak or they raise the cost of exports.
On the other hand, significant devaluation imposes tremendous risks on China. It makes Chinese goods cheaper, true, but it also risks US retaliation.
Plus, every time the RMB declines, it makes the cost of foreign denominated debt that much more expensive. And, while China has little foreign debt relative to the economy, it has big debts relative to foreign exchange reserves.
Balancing increased exports vs higher debt costs, in practice, they would raise exports a little in return for much higher debt costs.
There is also the risk of bring on a major crisis through the effect on future borrowing: in a falling RMB, no one would be willing to provide further lending in dollars, which would cause lending to dry up and cause them to burn through fx reserves.
Chinese banks are sitting on a mountain of bad loans. Asset prices relative to cash flow are absurd.
If they allow the RMB to float and open everything up, houses are sold, funds are pulled from banks, real estate and banks collapse from astronomical valuations. That is what we call shooting yourself in the face to take care of the fly on your nose.
Bottom line: China is starved for $$, but the US has alternatives: in Vietnam and elsewhere.
So who is really in control? The US.
2
@VCR This foreign denominated debt, is it Government, Household or Corporate. Indications are that - if it exists in the manner you state, it is corporate because that's where China has an oversized debt position! That means apart from SOE's, liability rests wth the presumably foreign banks that have advanced such loan. Its economic impact will only be seen when or if either China's growth stalls or interest rate climbs. The exchange rate impact is likely to be muted as such enterprises are in the main dollar earning exporters.
We've been told stories for decades now of Chinese banks and bad loans. In fact, part of the reason the US didn't tackle China earlier was the widespread belief in financial circles that its economy was - as you state, a house of cards.
You see the US as having alternative suppliers in Vietnam and elsewhere... These alternative suppliers are in the main Chinese subcontractors to US firms, with well established supply chains to China. What is happening is Chinese visible trade with the US is disappearing, but its invisible trade encapsulated within the supply chain is growing.
@VCR You're dreaming. They have lent us many, many billions. Apparently you missed that.
@James. Here's food for thought in the WSJ:
https://www.wsj.com/articles/the-weak-spots-in-chinas-dollar-empire-11565175960
The current Chinese government doesn't appear to understand economics all that well itself. While their reactions may be less irrational than those of Donald Trump, I wouldn't take it as given that their internal and external economic policies will form a well thought out, coherent whole. Which just makes the situation for global economics that much more dangerous.
2
In the past, Krugman has begrudgingly admitted that Trump has a very valid point about China. Out-of-date trade policies that made sense when China was much weaker are now unfair to the US. So, instead of taking up space (again) telling us how stupid the president is, why not offer the solution?
3
Maybe Americans should learn Chinese Economics: In today’s Times it is reported that Chinese are buying more Huawei Phones than ever as a Patriotic gesture to stand behind their own companies and workers in light of the tariffs and restrictions placed on Huawei due to intellectual property theft and suspected spying: think that will happen here, very doubtful as we are a multi ethnic society, unlike Chinas, whose only allegiance seems to be to ones self: isn’t it about time we realized that one American bargain item from China is the loss of another Americans job, sounds like we’re circling the proverbial drain.
1
@Ted. You have a point... just be aware that those jobs won’t come back to the US en masse. They go to Vietnam or Malaysia or maybe even Mexico. Many will also go to robots. Meanwhile - the smartphone market in China is literally twice the total population of the United States. Many US companies depend on China for profits - such as General Motors. Aside from Lenovo - most Chinese brands don’t have much market share here. So getting into a “nationalistic” purchasing strategy can also back fire.
So trade wars are easy to win. For China.
1
China will continue to take a measured response until 2020, at least. Fortunately for them (and us), they actually know their long-term interests are not served by petulant tit-for-tat retaliation beyond a certain point. They understand that Trump is an ignoramus and someone needs to be the adult in the room. They are waiting him out - for now.
Their patience will run out once they determine the calculus is tipped in favor of such retaliation. Trump cannot even spell calculus much less understand what it for or how to perform it.
1
Well then Dem's ought to hope that China "interfers" and causes damage to the US economy. Then 45 will surely be defeated. China is NOT going to negoitate with 45 and they're going to stall and hope that a Dem wins the WH and Senate; cause they "have nothing to lose".
1
The Chinese are building little artificial islands in the South China Sea. Lease one to Mr. Trump at a favorable rent and let him build a hotel on it. All will be forgiven.
3
Even if China seeks to “teach” Trump a lesson in economics, he is too ignorant and narcissistic to learn any.
Rationality and proportionality aren’t in his vocabulary. The only thing he knows from his business dealing is doubling down on whatever comes to his mind, taking a mile if you give him an inch, mistaking modest signals for something more sinister.
He trusts his guts more than the brains of those “ignoramuses” in his circle – let alone experts and policy wonks – and responds in his typical blunderbuss fashion.
“Know your enemy and know yourself,” wrote Sun Tzu in The Art of War, “and you won’t lose a single battle out of a hundred.”
Over the years, Chinese leaders have heeded this advice, going to great lengths to understand the internal political dynamics of the US.
Vice versa, Trump can’t be bothered to read in-depth analyses of anything, surrounding himself with people who lack strategic acumen and tactical management.
2
@J. von Hettlingen
"“Know your enemy and know yourself,” wrote Sun Tzu in The Art of War, “and you won’t lose a single battle out of a hundred.”
Over the years, Chinese leaders have heeded this advice, going to great lengths to understand the internal political dynamics of the US.
Vice versa, Trump can’t be bothered to read in-depth analyses of anything, surrounding himself with people who lack strategic acumen and tactical management."
What did you expect they're all thieves and con men.
1
Only a former Princeton economist could possibly wish that a President of the US take economic lessons from the largest communist entity in the world.
1
@Matt
That's how terrible trump is. Even China is trying teach Econ 101 to trump. But trump is too brain damaged to understand anything except obey Putin.
4
You go Ana Luisa! Mr Krugman should write you a nice letter.
Time for Krugman to hang his boots. His hate for Trump has clouded his vision and he might need some Eco 101 courses himself. One hopes he doesn’t go to a Chinese university for his refresher courses.
2
"Teach Trump economics?" HAhahahahahaha
Good luck with that! If China, or anyone can teach him anything, bottle and patent that technique/method and you'll be the next Billionaire.
2
Ignoramuses. What else it there to say? I think Moe Howard called his associates that quite often. Thank Doc.
1
Clearly he's never had a class in economics in his life. Or maybe he did at Trump U?
2
Tiananmen Square goes to Washington
Does this war looks like a mere trade war? Dr. Krugman is lying to Americans with falsely naive economics while he knows more than that. Ameican people needs to know the geopolitics that fake media never tell the truth because they were aleady bought by China money. The original intention of the initiating the war is to protect the pretro dollar system against petro yaun threat that China tries to achieve it through One Belt One Road initiative. Also, the US is on the verge of losing every technological edge to China if the US keeps playing game with fair market rules when China is playing all types of foul play through manipulating currency, stealing technology systematically, dumping by subsidizing thier zombie SOEs, bullying other surrounding countries, bribing influential people, and bluffing with falsified statistics. Dr. Krugman must know these better than anybody else but not telling the truth to American public. The question is how much money he or his institution got from China's secret money to be on the China side while the US is engaged in Cold War that may develop into WWIII. Everyone must know China is the evil behind Iran and North Korea. Dr. Krugman, don't you know that? Do you want your kids live in the world that the communist party is ruling? The US can't afford to lose this war for the short-term interests of people like you, fake media, wall street, and globalist tech companies. China must be defeated now and changed for the sake of the world.
1
@Yoon
This is good but I have to ask where to get "not fake news" and why the current administration cannot explain things this way to the US electorate? I think people confuse dislike of the President of His United States because of the person he is. He's had his chance to lead and he has failed. Policy aside if we are bound to have a conservative President Of The UNITED States then get another person who has some sort of credibility. Lastly this does sound like a conspiracy theory.
1
How can you expect to teach someone who knows it all?
2
". . . it’s grossly unrealistic to imagine that such a country can be bullied into scaling back its technological ambitions." When has protecting our national security interests been considered bullying, Paul?
Who's currency is being devalued? Who's closing factories and laying off people?
And finally Paul who predicted a stock market crash should Donald Trump be elected the 45th President of the United States?
3
"...no indication that this message is getting through."
Trump NEVER listens to others, especially the 'conventional wisdom', he NEVER reverses course based on anyone|anything else other than his own private proclivities (and mysterious thoughts); Trump will NEVER learn anything and will NEVER act in a way we (the collective 'we') would consider rational, measured, thoughtful, etc., etc., etc..
This has been demonstrated time and time again, consistently.
@JohnW
"This has been demonstrated time and time again, consistently."
And resulted in bankruptcy time and time again, consistently, until he hooked up with the russian mob and started money laundering, first in his casinos which failed because of bad management and then buying properties and selling to russians, looking to launder their illl gotten goods, at exorbitant prices
1
Our politicians should read the LBJ biography by Robert Caro and refer to the era around Coolidge and Hoover at the time of the depression. Greed and terrible trade policy predated the crash of 1929. It started with the tariffs that ruined many farms who felt the effects before the rest of the economy. Maybe some of the Democrats could refresh their memories of this time and help avoid another disaster.
Giving back some money to placate farmers (as trump is dong) is not a way to avoid a potential depression.
History should not be repeated in this case.
4
There are rumors that China is willing to crash global markets, and even endure severe economic pain in Asia, in order to get rid of Trump. And China has the power and brains to do this. So then, would it be China vs. Russia in the U.S. election?
5
To win in 2020, Democrats should focus less on what Trump is and instead highlight what he does. By now, everybody and their in-laws have indelible opinions on the character of Trump. Therefore, to harp on his personal attributes yields no additional benefit. However, the impact of his policies are less well-known, and that’s where the emphasis ought to be. So, teach the voters.
512
@Aspartic Baloney - you call him out for what he is. Over and over. And not everyone has indelible opinions. Many are realizing the horror that the man is.
30
2020 should be a referendum on Trump to the maximum extent possible. Depending on the media market, it can be his disastrous policies on trade or foreign relations or immigration, or his criminality, or his stance on healthcare, or his cozy relationship with the NRA and gun manufacturers.
It’s a target rich environment, and all his opponents have to do is overcome the constant lies, Fox Noise propaganda, and probable foreign election interference.
32
@Armo: There's no reason not to call him out over and over. But most people (a very large majority) really do understand what Trump is like and it would be SUICIDE for Democrats to run against Trump's character as their primary campaign strategy. According to an article in the NY Times in the past couple of days, more people like Trump now than in 2016. And there are plenty of people who don't like, or at least aren't sure, about the Democrats. But Trump's policies are about as terrible as his character, with the potential for much more harm to the country and the planet. There are many issues that matter to Americans on which Democrats can campaign--healthcare, global warming, trade, and more--and Democrats can beat Trump on these issues! Call Trump out but beat him on the issues until he's black and blue!
39
The most maddening thing about Trump's policies and the foundation of his ignorance about economics is that there is no domestic economy that stands on its own. The US economy is a component of a much larger international economy where supply chains, finance, liquidity, supply and demand span the entire globe. We are literally all in this together.
Trump has done everything he can to ruin every multilateral agreement he can get his hands on. He thinks the world operates on purely bilateral deals. It does not. Buying an apartment building may be a bilateral agreement, but managing the largest economy in the world is multilateral squared. Trump is totally incapable of understanding the concept of an integrated, global economy.
So he tries to punish China and China just moves the goalposts. China is holding all the cards it needs. China thinks in terms of decades, not quarters. Trump can't think past tomorrow.
By next spring, there should be plenty of farmland available to purchase for 10 cents on the dollar.
692
@Bruce Rozenblit
Sorry the farmland is already promised to agri companies. So now, they can finally can stop acquiring additional land by suing small farmers into bankruptcy.
70
@Bruce Rozenblit.
"Trump has done everything he can to ruin every multilateral agreement he can get his hands on".
A hypothetical Manchurian candidate would do just that AND discredit the country's intelligence services AND not initiate counter-measures for foreign interference in elections AND damage relations with allies AND foment racial tensions in the country AND denigrate a free press AND remove capable professionals from leadership positions AND fall in love with autocratic strongmen ....
216
@Bruce Rozenblit Sometimes a decisionmaker may seem ignorant or irrational, then look at the final effect of the policy and ask if that's what he and his cronies wanted all along. Bankruptcy to small farms and Big Ag picks up the land. A transfer to and consolidation of wealth to the wealthiest. Isn't that the defining theme of Trump's policies?
79
The preposterous notion that Trump is capable of or willing to learn anything from others is a grim reality.
He has long been given to instant gratification and impulsive behavior. The Chinese culture, on the other hand, is known to favor the long view, steady as you go, while having the patience to wait for what to them is a more perfect world. It would not be unfair to suggest, at the risk of stereotyping, that the Chinese thinking and deliberation are the antithesis of Trump's decided deficiency of thought and considered judgment.
The consequences of Trump's non-existent impulse control coupled with his egocentric certainty are playing out on the big screen, in a geopolitical horror film.
This its not to suggest that the Chinese are the good guys. Clearly, their behavior, both calculated and self-interested, leaves something to be desired from the American perspective. But Trump's juvenile actions certainly make them look like the adults in the room.
2
China is trying to make a reasoned, rational response... to an unreasoning, irrational man-child bully. What China considers a restrained, limited retaliation, Trump will see as weakness and capitulation. Trump will brag to himself "I really do know more than those Nobel-prize economists; I'm "winning", and he will double-down on stupid. That's what Trump does.
At some point, China will run out on it's patience, and start taking stronger steps, likely throwing the US economy, and probably the rest of the world, into recession. What I hope is that China is timing that eventual hardening of it's response to maximum effect to damage Trump's re-election bid. There is no way even Trump can convince anyone outside the White House staff that his Trump Tariff trade war is anyone's fault but Trump. No blaming this one on Obama... and Hillary is old news. If China wants to throw weight on the side of 'anyone but Trump' in the next election, they can do it. Trump, having masterfully manuevered himself into a corner, is stuck. The real risk for America is that stuck bullies lash out. Trump is dangerous, because he is unreasoning, irrational -- and stuck.
5
@Jim Brokaw
It is much simpler for China then you suggest here.
All China has to do is simply refuse to engage with Trump unless he wants to actually engage in fair negotiation... something Trump clearly does not want to do (given every single meeting between nations is blown up in real time by twitter grenades by Trump against China).
When the party on the other side of a negoitation is completely nuts and unreasonable.. you simply stand your ground and wait them out. This is exactly what China is doing.. and they only up their actions in response to provocations by Trump. Not once has China been the one throwing economic bombs in this exchange.... it's always the US. Trump used the same tactics for decades in his business and continues to think that what he did ineptly as a private business owner somehow works for the worlds largest economy.
China will simply wait Trump out.... agreeing to meet and negotiate, but only on what they perceive to be fair terms and conditions. China plays the long game, and actually does negotiate to a Win/Win.. which requires actual compromise between parties. Trump is an exceedingly short attention span mind... and a person who only believes in Win/Lose and only if he is the winner.
1
In this modern world, some things actually ARE as complicated as brain surgery.
Trade issues with China are serious and complicated. A
but as per usual, Trump is trying to handle a complex and delicate operation with a sledge hammer. It is not tough, it is not plain speaking, it is not "street fighting." It is just plain stupid.
3
What's surprising is not Trump's abysmal ignorance of economic matters. That's been obvious from the get-go. What is surprising is the number of wealthy campaign donors from the business community still willing to contribute to his reelection. Either they are as ignorant as he is, or they are investing in the Chinese stock market at the same time they're investing in him.
6
I look at every stock market plunge with glee knowing how Trump wrongly sees the stock market as an index of how the economy is doing.
I am willing to bear the pain of a decreased stock market and a shrinking economy brought on by the Tariff Man's stupidity if it helps to defeat him in 2020.
2
Tariffs can be a useful tool in the hands of a knowledgable administration. Trump is like a baby driving a car. He'll crash soon. Like China all we can do at this point is wait until he's gone and then try to clean up the mess he's made.
Or, as Martin Sheen might have said to Marlon Brando: "Method, I see no method at all, Sir."
Just what I wanted. Some guy that had to settle his trump U. scam of our Veterans so that he could get inaugurated running the negotiations with China on business it's taken the Midwest 30 years to develop. I'm relatively positive Xi isn't a common "grifter." That means we're in trouble.
Never, ever, say propaganda/Fox News doesn't work on the masses. Never thought I'd ever see this level of madness in this country. Ever.
2
Of course Trump isn't learning anything from his trade war with China. Trump is incapable of learning ANYTHING, because 1) he doesn't read, 2) he has no observable attention-span, and 3) he thinks he already knows all he needs to know.
Trump has weaponized ignorance. He wears his narcissism like armor. He believes that threats and insults and tariffs will bring China (a nation of 1.3 billion people) to its knees. His arrogance is astonishing.
Trump truly does live in his own alternate universe, while those of us in the real world suffer for it.
3
China is not so much teaching Trump as they are trying to keep their economy as stable as possible while waiting for Trump to leave the scene either by impeachment or by losing the election.Trump is an economic ignoramus-there is no lesson he will learn.He has spent a lifetime overspending, skipping out on loans ,not paying bills and filing bankruptcy so everyone gets holding the bag.He is unreachable-the Chinese have figured that out and hold in their hands many cards they could play to cripple our economy.
2
Trump is a septuagenarian. He operates on a set of heuristics he picked up along the way, and that served him well. This is true of most wealthy powerful people, but especially so of Trump, who is a narcissist. Trump attempts to fit reality into his frame instead of adjusting his frame to reality. That is why he doubles down on something like trade wars or kids in cages even when it should be obvious to him that it is not working.
And a word of caution about Biden: he is also a successful septuagenarian, though he lacks Trump's personality disorder. Biden will bring out-of-date heuristics to the Oval Office, too.
4
@Charles Tiege
Correct.
But I doubt Biden will be the candidate. And I personally have not forgiven him for having been such a wuz in 2016, when he put his personal grief over the nation.
Nothing wrong with that by itself. I can understand it. But such a person has given up any legitimate claim to be the President. Let's say he had been President already. Would he have resigned because of his grief.
2
@Charles Tiege
Tulsi Gabbard
"It looks to me as if they’re still trying to teach Trump some economics."
He (djt) is unteachable. He already thinks he is smarter than everyone else.
2
Sadly, incoherence, stupidity, and stupidity again, are not what the framers ever had in mind when they listed high crimes and misdemeanors as reasons for removal. Trump's incomprehension of fundamental economic realities plus his stubbornness to accept experts opinions of logical consequences makes his presidency the most dangerous in our history
2
I have been waiting for this article. You can tell the Chinese have been patient with him, their shot across the bow. Next could be a real crash. Trump and unfortunately Mnuchin aren't getting it. I think we are boxed in now. We're an unreliable trading partner, not only with China but Canada, Mexico and the EU. Our domestic problems are such a mess this week proved this administration isn't capable of governing. Amazing that America is no longer the reliable, strong voice in the world. We're weak and unpredictable. This reality show needs to be cancelled soon.
2
"So Trump is in a much weaker position than he imagines." And so it has been throughout his life. He is a narcissistic disordered basket case and until removed we all suffer the consequences. Sadly, the will is lacking; down the slippery slope.
3
Trump is producing a brain drain in the federal ranks, pushing out scientists, economists, experts in many fields. Replacing economists with radio talkshow bloviators. Trump is ruining America. Trump is weakening America.
5
Wouldn't it be wonderful if an actual sentient human being was occupying 1600 Pennsy Ave? The Dishonest POTUS obviously slept or cheated his way through Wharton - Eco 101 would be enough for him to understand all that he does not about economics.
China does need a comeuppance - they need to be held to account for the theft of intellectual property and for dumping of commodities like steel, solar panels and manganese. We have anti-dumping laws to deal with this. What DD is doing is just old fashioned saber rattling to see if he can scare the Chinese into capitulation. The problem is that they, and the rest of the civilized world, understand that Trump is an empty suit, incapable of planning, strategy, implementation.
Once Trump times out, the next person up will have a yeoman's job returning the USA to it's place as a trusted world leader.
I would like to know what do the candidates tell the farmers when they ask “What are you going to do to permanently fix the problems caused by Trump’s trade war?” A new farmer welfare program is not the answer.
3
If it isn't on Fantasy Television, Trump will never invision it.
1
The really big guns that China has not even pointed to are its huge store of US treasury bonds.
All china has to do to break us is refuse to roll over those bonds as they come due and demand payment. There is no way the US can meet those payments as the bonds mature. We will have to find other buyers.
This will drive interest rate suddenly upward, resulting in large losses in the bond market.
Then, if China wants, it could pick up similar US T-bonds at discount prices, making a killing.
Who know what this would do to the already deeply warped yield curve? (Well, probably Mr. Krugman knows.)
4
"The Chinese, by contrast, have yet to deploy anything like the full range of tools at their disposal to offset Trump’s actions and hurt his political base.
Why haven’t the Chinese gone all out? It looks to me as if they’re still trying to teach Trump some economics."
This is a disturbing thought. If correct, Chinese leaders may think they will be better off under Trump than under a Democrat successor, which is difficult to imagine.
We need all the help we can get to remove the monster riding this nation's back.
1
@Jim Remington
Just compare the deep and lasting impact that Obama's multilateral TTP agreement would have had on China's economy and the entire region, to a couple of randomly signed, unilateral tariff increases by executive order by the current president (which can be undone by a stroke of a pen too, AND aren't supported by ANY US ally, so extremely fragile), and you cannot but conclude that of course, China is VERY happy to have Trump in the WH, and not a Democrat.
The TTP would have durably shifted the entire economy in China's backyard, which wouldn't so much directly hurt its economy but rather strongly spur growth for its neighbors (and the US, who would in this was have considerably increased their economical and political influence in the region).
And by doing so, sooner or later China couldn't but want to integrate that common US-Asia market too, as doing so would seriously help its economy, and THEN we would have had real leverage to engage in multilateral negotiations about a political agreement that reduces all that is REALLY problematic for us today (NOT the trade deficit, obviously (you must be a fool to imagine that if you're wealthy enough to buy more from less wealthy neighbors than they can buy for you, the one have a problem is YOU, not that neighbor ...), but important stuff such as IP theft, labor conditions and minimal wages in China (which are keeping ours low too), tariffs on US export products, etc. ...
2
Trumps goal is not MAGA his goal is to make America a capitalist dictatorship similar to China, Russia, and the rest of his heroes. The republican party and the handful of their billionaire supporters are going to go along with him. A few commentators feel let him win so we can see their failed policies and then throw them out. They would be a good thing if their polices were to MAGA. However it will be too late and they will succeed in their true plan to Make America Like China. When that does happen watch how fast they seize your guns.
1
Accusing China of being a bad actor serves to divert attention away the increasing market power of multinational corporations who have greatly benefited by moving much of their production to low wage countries including China. In other words, it serves the interests of the plutocrats to demonize China on trade and intellectual property issues when soaring income and wealth inequality have mostly domestic causes.
The IMF has now weighed in on the Tax Cuts and Jobs Act: As expected, their study concludes that it did not lead to any increase in business investment after accounting for expected sales growth. In fact, every serious analysis has come to the same conclusion that the corporate tax cuts have not led to any increase in business capital spending. And one reason for this according to the IMF study is the increase in the market power of corporations, especially the multinationals. One reason for their market power is their ownership of intellectual property such as patents and trademarks. But intellectual property is a legal construct. What might be considered theft in the US may not be under Chinese intellectual property laws. Anyway, most Chinese companies respect US intellectual property law even if Chinese intellectual property law does not fully conform to US law.
What we should be talking about is not China but the monopoly rents of the large multinationals.
7
Trump has succeeded in de-stabilizing every corner of the world (including our own) and the GOP are supposedly the guardrails?
6
What this article doesn't mention is the huge capital investment China has in the US economy and other countries around the world. What this means is that China has the ability to be even more disruptive should it choose to. A bit of currency manipulation would be the least of it. Since the Chinese government has shown itself not as driven by capitalistic ideology as the rest of the world's so-called free marketers, they could take a few lumps of their own by engaging in some international strategic reorganization of their portfolios.
1
The trade war initiated by Trump is essential for two reasons. First, we need China to stop stealing our technology or force companies to surrender technology in exchange for opening the markets. We need a fair trade deal. Secondly, we need to understand our dependency on China so we can figure out how to avoid serious dependence. Otherwise, our foreign and domestic policies will be influenced by Chinese resulting in loss of our freedom. We need to advice Trump what steps he can take that would hurt China instead of simply saying what he is doing is bad.
6
@Kodali We do not need a trade war to accomplish the intellectual property and technology transfer problem. Trump is using a butcher knife to do surgery. There are smarter ways to approach that issue.
24
"Advice Trump." Who has done this and, how could it be done? He takes none and the more informed the advice, the less likelihood it will be taken and thoughtfully applied. Remember, "I alone can fix it!", Donald Trump.
8
@Kodali
I don't see how tarriffs could change technology theft or contract agreements that require technology transfer. That takes laws and cyber and physical security.
I think there are plenty of economists that understand exactly how we are dependent on China. They own our securities and lots of real estate. They are part of the supply chain of many products. And a significant portion of our society can only afford chinese made products bought at Walmart Target Costco .. etc. Very few people will pay for made in the USA products.
So experimentation is just reckless, especially if you do it haphazardly and without the benefit of any of the experts we do have .. people who have spent decades understanding the complex economy of China and the world (not just the US and China playing ball here, it is also the EU).
12
Which brings me to an option I never heretofore would have considered: re-elect Trump so that you take away what is sure to be the Republican strategy of blaming the upcoming recession and other assorted national crises on the newly elected democratic president. Let every disaster that’s been simmering on the stove bubble over while he is in charge. Then maybe we get rid of the republicans for a generation instead of just 4 years.
18
@Patricia Brown, how many of us can survive another 4 years of Trump? I see your point but I'm not sure this country can survive 4 more years of Donald Trump and Mitch McConnell.
29
@Patricia Brown
That was my strategy when he got elected - let's see what people are really made of, let's see what the natural extension of these ideas are, it would be good for other points of view to be heard and realized.
However, I really think it's backfired. He is more popular than ever and there are at least 2 parallel universes - one where people speak standard English and read, one where everyone plays telephone, garbling everything they hear and then believing it.
I predict Trump will win a second term and he will still find a way to blame Obama for everything he doesn't like, won't deliver on his health care plan, might actually start a war (elsewhere or even here!). I used to thing there was a bottom; I know now I had no concept of how deep that could be.
12
If Trump is still around when that recession comes it will be of course Obama’s fault.
1
Alas, Paul, trump has had so many teachable moments to learn from throughout his life - he even went to the best schools (how humiliating for them) - yet he has learned only the opposite or nothing at all. Not even the Chinese can teach him anything - especially when as a student and apprentice trump only pays attention to Putin, Kim, Erdogan, Bibi, MBS, Banon, Mitch, LaPierre, etc. so he can become a more effective tyrant.
12
What do you expect from a self-styled genius who, in fact, is a serial bankrupt and might need co-signers for his debts.
That said, the real lesson China is giving the US economics profession is that POLITICAL economy is not dead, and that countries that practice MERCANTILISM have advantages over those that practice a form of "free trade." China would not be able to have large chronic trade surpluses with the US according to standard trade theory - unless, of course, it had practiced trade restrictions to achieve that outcome.
Going beyond trade theory and economics, as practiced by conventional economists, there is the largely ignored issue of whether the state functions for the benefit of the economy, or if the economy functions for the benefit of the state. We know which country fits which alternative, and why China has reaped great geopolitical dividends from practicing a version of Friedrich List's National System of Political Economy - which was based on the ideas of ALEXANDER HAMILTON - in which the economy is an instrument for the building of state power.
The results of the US notion that it's all about the economy and China's in which the state dominates is clear. China has grown in economic activity, and in military and political power, absolutely and relatively to the US. Trump might be too ignorant to understand these developments, but his basic "instinct" to be seen as a "winner" might explain what and why he is up to in respect to US - China relations.
3
@San Ta, to your well-taken point a corollary. There is something to be said for the tactic of divide-and-conquer, or at least to further your own agenda or standing. While someone who is a catalyst by being divisive in our country's politics as DJTrump, other countries can capitalize on this country's weak lack of economic as well as moral integrity. Our brand of freedom is bordering on chaos. Whether I stand with it or not, more controlled forms of economic policy and of speech can flourish meanwhile. Perhaps seeds of division, are planted very purposefully and their product later reaped. Planting progressive crops of seeds throughout a long growing season reaps higher yield. This is the reason some foreign governments may have wanted Trump in office in the first place, (now and will, yet again). In other words, his instinct for divisiveness, soapboxing and furtive economic policies further their long term chess playing agenda. Trump's woeful ploys to thwart China for example, may be a bit of a setback to China, but it is a minor one compared to the net positive gain it may reap 50 years from now. They know it and are playing it, him and us, IMHO. Fools be those who fertilize weeds.
2
Mr. Krugman: I think you already know that it is China that doesn't understand, that all they needed to stop the trade war was a huge gold medal, a glowing orb, some commemorative coins, and all the accompanying fawning flattery, including minute by minute Twitter support of his every outburst. That last part would have tipped the balance.
8
Trump will only see the light when his real estate investments suffer.
6
The lack of currency manipulation that Krugman duly notes is lost on the overwhelming majority of the media and the populace. Nationalism plays easily and plays well everywhere, while considerations beyond who is going to be 'kicked of the TV-show island' is beyond the interests of most honest, hard-working people.
At the start of his reign, Trump abandoned the Trans Pacific Partnership, a multi-national agreement that aims to constrain nefarious Chinese practices by supporting fair trade around the Pacific. Now, he strikes out wanting to limit the Chinese practices.... No nation would be foolish enough to join America on any initiation with Trump in place. It is easily foreseen that he'd dump any initiative to strike an "amazing" (i.e. awful) solo deal with China that leaves allies holding the bag with a wrathful China.
6
China is totally schooling Trump. More importantly, I think they are very clever about when and how much schooling to administer. For instance, it makes no sense to body slam Trump this year. Next year, in the heat of the election, they could hammer Trump and, unless this situation improves, meaning Trump decides to learn something (ha ha ha), that's exactly what will happen. Putin may be pulling for Trump, but Xi will be pulling for the Democrat who wins the nomination. That's the only way China can deal with a rational being.
11
Maybe Trump is living proof that luck trumps skill. That seems to have been true for him so far. If his luck holds out, China doesn't have a chance (turn up sarcasm detectors).
2
Maybe we will just have to live with Trumponomics until 2021 when, after living with policy dictated by a stable genius, even Trump's most ardent supporters will have selected someone intelligent, sane and rational to occupy the Oval Office.
1
"There is, however, no indication that this message is getting through."
If the Chinese think that subtle messages will get through to Trump, they are acting as irrationally as Trump. I'd guess that they are doing what they can to limit the immediate damage, while building up their resources and biding their time to see what comes in 2020. (As mentioned buy Dan below).
6
"On Monday he got the Treasury Department to declare China a currency manipulator, which was true seven or eight years ago but isn’t true now."
"...and my guess is that China’s mini-devaluation of its currency was an attempt to educate him in that reality."
These statements appear to be in conflict, no?
2
My guess is that China is biding time until 2021. They're just trying to wait it out, hoping that America will acknowledge Trump as a colossal mistake.
If he gets reelected, I expect things on both the domestic and international fronts to go south very quickly.
26
@Dan - Spot on. The Chinese approach all foreign relations with the West as a long game. They are accepting the punch from Trump and looking at the impact based on a 2021 Democratic President. Trump’s tariffs are executive and can and will be reversed on a dime. Krugman expresses their strategy as one of quietly displaying what they could do if Trump wants to escalate his tariff threats.
Trump must and will continue to increase tariffs until the Chinese relent, this is his business model from his days of stiffing banks for loans. But this is the arena of sovereign nations and the blowback from the Chinese will cause our WalMart based economy serious damage. We are not China’s only trading partner.
4
During the last period of extreme inequalities, some brave leaders understood that the first step toward unity was more broadly shared prosperity. Powerful forces opposed this solution, but these leaders prevailed and conditions improved for many.
During the current period of extreme inequalities, our leaders divide and distract us domestically by our differences and divide and distract us from others internationally by trade wars, threats of wars, hot wars, and maybe even a new cold war. This time too many of our leaders are selfish and shallow. These and other flaws prevent them from admitting that many of our problems are because of them. And too many of us keep voting for flawed leaders hoping that this time our shared problems will be solved and conditions will improve - only to be disappointed again.
7
China’s trade surpluses are not in the Chinese governments control? Please mr Krugman, China is a top down economy as we saw when they devalued their currency. I would say the opposite is true. The Chinese government will do whatever it takes legitimately or otherwise to manipulate their monetary policy. Chinese economic dominance is their goal. They plan to overtake the United States and at this rate will do so much faster than we can possibly know. Trump figures that the Chinese buy a fraction of our products compared with the massive amounts of Chinese products Americans purchase. I agree trump knows very little in terms of economic policy. But most Americans will agree with him on this fight. China has to be brought to heel before it is way way too late and we end up like Britain of France. Unfortunately trumps negotiating style leaves one to question his ability to operate a lemonade stand.
4
@Robert
So China needs to be "brought to heel" so that America can retain its dominance. China with 1.4 billion people compared to the US at .3 billion should be subservient to the US.
However, not to worry. Climate change and or nuclear weapons exchanges will likely solve the problem. Maybe its time for the earth to start all over again.
10
As Krugman points out, less than 20% of Chinese exports go to the US. The last time I looked it was 18%, the same as for the EU. By going for an exclusive deal with Trump’s name on it we chose weakness, as the Chinese have certainly understood.
On a related point, another article in the paper today today talks about the patriotic reaction in China to the attacks on Huawei. We chose to initiate a trade war with China in large part to get open access to their market. What could be crazier than that? It’s not as if there were no other options—like doubling our leverage by working with our allies for instance. We just decided trade wars are easy.
We’re going to be left with the results of our weakness compounded with the enduring legacy of the trade wars: less access to the Chinese market and a possible split of the world into isolated hostile camps. There was nothing mandatory about that situation—many Presidents would have avoided it. This one thinks an on-going trade war with the sneaky Chinese will be good for his re-election, and that’s the definition of success.
15
@Jerryg: "...many Presidents would have avoided it."
Many presidents did avoid it and it never got fixed. Maybe if TPP were showing results and Clinton had emphasized it more, she'd be president now. In that case, our discontinuity of leadership is a serious weakness, although in the case of Trump, it might save us.
1
@mlbex Any President was going to confronted with the challenge of China. The expectation was that China's status as a developing country would be renegotiated in the context of the WTO. China was fully expecting to deal with a united front from the West. Trump's go it alone approach got them off the hook.
@Jerryg: I'm not in favor of Trump's approach, but I'm not going to let the Democrats off the hook either. They weren't getting the job done, and that's why Trump won. Our best (only?) hope is that the Democrats win in 2020 and do get the job done, through rational but firm engagement, and by regaining the trust and support of our allies.
Maybe TPP would have done the job, but Clinton's messaging on that score was lukewarm, as if she didn't really believe it.
1
Although I live in China, I have no idea what the government policy will be. But I do have a good sense of what the Chinese people think; they don't want to give in to a bully like Trump. This is a good thing for any government - when an external force threatens, people tend to rally around their own.
The average wage in China is far lower than in America; it still is poorer. And they don't buy as much American products - but American brands are still well liked. Yes, they've been buying more Huawei phones than Iphones - but I've had students tell me personally Apple products are better. I had another university student, who was then getting his license, that Chevrolet is his favorite brand of car. The point is: this is a huge market that is only going to get bigger and richer. Chinese people want quality products, just like anyone else; American companies can compete here.
I live on the most crowded street of a big city - so just tonight I walked past thousands of people on the street. I'm usually the only white guy around, and to this day I've never had any hostility. The Chinese are very proud, but they're also very pragmatic. They'll get through this. It's really pointless suffering all around, though.
25
@David
David, how do you think about the fact that while Apple iphone and American cars are sold in China, your chinese students are not allowed to access google, facebook, twitter etc to learn about the issue from the American side or independent sources?
The "public" opinion in China IS rallying behind the government with fervent nationalism. But let's not forget that all media layouts in China are censored and those expressing different opinion risk to be thrown into jail where physical torture is a routine. I know a young school teacher was dragged out of his bed at night by police just because he expressed some misgivings on WeChat a few hours earlier.
1
@David
You consider a Chevrolet a quality product? That's news indeed.
Trump is of course erratic, because he really does not know
how to be anything but erratic.
I can imagine every world leader who wants to have trade
deals are hoping Trump will be forced out of office...
Impeachment proceedings should become more forceful.
17
Tariffs on Chinese goods are helping to make America great again. There's still a long way to go. Before the 2020 elections we need tariffs on European Union products, Canadian and Mexican products.
American farmers have been hurt by the Chinese tariffs on soybeans but the farmers are too much in love with Trump to care. Besides, the farmers don't mind transitioning to welfare queens which gives them the luxury of time to attend Trump royal rallies.
Chinese tariffs on American farmers is only a beginning. When all other trading partners put tariffs on American goods we will see some real American pain. Not just a recession but perhaps a depression.
To make America great again America and Americans will need to suffer real economic hardship and learn some humility. Americans should learn to be more thoughtful about who they vote for and to treat others with respect. Then we can be great. Again.
24
@JABarry
So basically you are saying that the US should discourage trade with other countries. It should impose tariffs on goods made in other countries and coming into the US and the the other countries should do so on American goods coming into their countries. Fortress America is the goal. When that is achieved America will be great again. Thoughtful treatment and respect are only for other Americans.
China has a long-standing diplomatic program of patience. No matter the harmful trade policies that the Trump administration implements, the Chinese government knows that they will be short-lived, only lasting as long as Trump's presidency, another one to five years. No need to rock the boat when the seas will settle after Trump is gone, which he will inevitably be within the next five years at the most.
12
@Mark but Trump doesn't want to leave in five years, and Republican Kool Aid has contributed to a general underestimation of his random, ADD-style hold on the culture.
1
@Mark Especially when China now has a president for life.
1
"So this trade dispute will probably get much worse before it gets better."
In other words, exactly what Professor Krugman hopes for because a recession and/or stock market crash will tilt the presidential election in favor of the Democrats. Where's the upside to openly suggesting that your enemy change his tactics or strategy when you're set to win the war if he doesn't?
1
@Earl W. You are assuming that Krugman, like Republicans, would rather damage America then help their political opponents. Democrats are not like that, as evidenced by the vast disparity in federal government help to impoverished Red states over successful Blue states. Trump has used politics to direct hurricane relief funds and wildfire funds to states that voted for him, but Democrats are not that corrupt and evil. And there's the fact that the Affordable Care Act helped red states much more than blue states (though many red states rejected that money out of spite).
21
@Earl W. Let's hope so. And finally be rid of the moral vacuum in the White House. Four bankruptcies to his credit, bad pun intended, deft money manager Trump continues to show the world brilliant ineptitude. Economics aside, the turnovers in his Administration, whether chosen or forced, have for the most part left behind those willing to stand behind and defend one unfit for his job.
1
@Rodney
Can we please stop with this trope that blue states are makers and red states are takers? It is no more true on a state-level basis than when Mitt Romney said it about 47% of his fellow citizens. Red states pay less in federal taxes than they receive in federal spending because they (like lower income individuals) earn less on average than the wealthier blue states.
1
Many think that China would like to see Trump lose the next election. I'm not so sure. Trump has been great for both China and Russia. Trump's withdrawal of American leadership on numerous issues world wide, coupled with his alienation of traditional American allies has left a large void that the Chinese and too a lesser extent the Russians have been more than happy to take advantage of. His tariffs are a small price for China to pay for the Chinese expansion that we have seen over the last couple of years (I use the term "small price to pay" in the figurative sense, unlike Trump and his ignoramuses I know that importers pay the tariffs which are then passed onto the American consumer). Trump has no coherent strategy on any issue of substance not to mention a strategy on how to contain Chinese expansion.
30
Prof. Krugman and for anyone else who cares to answer - the Republicans exist only by the good graces and political contributions of the rich and powerful. The quid pro quo is legendary.
So, why isn't the GOP hemorrhaging wealthy donors, or at the very least, why aren't the rich and powerful influencing decision-makers?? The wealthy thrive when the economy is healthy and growing. They can't appease shareholders if profits are declining.
I would think no company would be more impacted than Amazon. Consider that it's $356 billion valuation is so big, it's larger than Wal-Mart, Target, Best Buy, Macy's, Kohl's, JCPenney, and Sears combined. Amazon is going gang-busters currently.
What is it I'm missing?
7
@OldLiberal
The wealthy thrive no matter how the economy performs for working people. A little disruption is nothing to a billionaire donor, if it distracts Americans from the inexorable replacement of federal judges with free market toadies, and the suppression of middle class votes.
16
The mistake that everyone makes is judging President Trump based on the standards for a sane, rational person. He is actually quite easy to understand and predict once you come to the realization that this man is a PSYCHOPATH. Period. Don't believe me? Google "20 traits of a psychopath." Once you understand who/what he is, he makes perfect sense. Except that he's the President. It's long past time to lawfully remove this man either through impeachment (and criminal indictment) or through the 25th Amendment. I really don't care. But he needs to be lawfully removed from office immediately.
58
@James A. Cronin Resignation would do.
@James A. Cronin If Trump was insane I would have some sympathy for him. Fact is he is just a (you pick a pejorative).
1
And, the unspoken bottom line, "Average Americans suffer as a result".
12
So many pundits say the incumbent is a virtual lock if the economy is strong. If the answer to Colludy J. McTreason's demise is a recession, bring it on. Please.
9
@Acajohn
I suppose the blue collar base of the tRump is happy to work on slave salaries in a jail and calls that the 'economy is strong'. It is NOT strong for wage earners.
4
Toni Morrison explains Trump in one sentence: In order for him to stand tall someone else has to be on their knees.
Most of us learned the folly of this attitude in middle school but not him. His policies make no sense, there is no logic to any of it except to make him appear the "winner" to his base. In Trump world you can't be a winner unless you can point out the loser.
26
Does Trump's attacks on China benefit Putin? Maybe his actions are not so aimless after all.
4
With crop prices are falling and Walmart prices are going up, red state voters will be sorely challenged to keep the faith.
The GOP can dismiss El Paso and refuse to consider common sense gun laws. But it's the economy stupid. Maybe the impact of Chinese tariffs will be the real turning point.
9
@Jane
Eventually the President will lose even a checkers game. Always has. But until that happens, and a smart strategists moves him into corners, he will expand the playing field to give him more wriggle room to be nefarious.
Shame on every person who voted for this person. You will never be forgiven.
4
At this point, it's not out of the question that Trump may pardon Bernie Madoff and make this swindler his economic czar.
15
Thirty years from now, China will celebrate its communist revolution centennial. With or without a second minimus potus, the commodities markets will have been dedolarized by then.
That will be one of the last nails in Americanus hegemony coffin. Both countries will have a rigid no-consent surveillance economy but America may have some cosmetic opt-out bells and whistles and other free shiny gadgets.
Which tyranny do you prefer? U.S. Big Tech, China Big Tech or a police state? Invalid syllogisms always had traction in America.
3
@Le Michel The Patriot Act demonstrated that Americans will accept 'anything' in the name of security from 'the other'.
"If it saves one American's life, then 24-hour surveillance and a presidential dictatorship are worth it!"
1
China should talk to the senior executive staff of Deutsche Bank. You know....that monetary fount Trump and his family relied upon exclusively back during his run of 4 bankruptcies? Back when Goldman Sach's refused to loan them one thin dime?
If prompted I'd bet those senior exec's would tell China to not coddle the man. Coddling him just enables more abusive behavior. Cut him off. As painful as it might be to do so that's the best solution to the situation. You're attached to a leech who understands only how to borrow money; not pay it back. You're dealing with someone who doesn't understand Quid Pro Quo.
He's too self-involved and too ignorant of finance and economics to be considered a trustworthy partner. Cut him off. 'Course...you know what that means for the rest of America? Guilt by association. But I don't see China doing this.
They're still trying to make an irrational relationship rational. I don't know about governments, but I'll tell you that in personal relationships that never works. It always turns out badly...for both, though usually it's one partner who suffers more than the other.
I won't pretend to know where this is all going, but as an American I am protecting my net worth as best I can against the probability that none of it will end well. I wish us all luck, because we're going to need it.
John~
American Net'Zen
10
You can`t convince a mentally ill person to abandon his delusions with logical arguments . His delusions of grandeur , his narcissism , his weak ego are his guiding principles in economics as in anything else . He will find assistants and enablers in his destructive maelstrom like Peter Navarro or Larry Kudlow . But the crux of the problem is not wrong ideas . The crux of the problem is the mental health of the man in the Oval Office . That is the reason the Chinese will not be able to teach him anything and we will all suffer the consequences .
27
@Bernardo Izaguirre MD Has Larry Kudlow ever been correct about anything? Just asking.
So I ask my fellow Americans what could possibly go wrong putting a 6 times failed businessman and reality television actor in charge of the worlds largest economy?
34
@Chris
Correct.
I was done by those whose answer to almost anything is: "What could possibly go wrong? This is not brain surgery. We just need a common sense man in there, someone who I would have a beer with." (*)
And financed by those, who spent a lifetime exploiting and benefiting from the gullible.
--
(*) If those guys ever had a beer with Trump and would learn what he thinks of them truly they would be devastated.
1
"China’s trade surplus with America, which has multiple causes and isn’t really under the Chinese government’s control."
Are you serious?
3
@Reuven I think the "Buy Chinese" laws enacted in many US States that caused it...
It might really have something to do with being a low-cost manufacturer for American companies. US firms fire US workers, have products made in China, retail in low-cost US stores (hey staff, thanks for the volunteer 1/2 hour today) and make massive profits that accrue to the C-suite and shareholders. What large donor to the GOP would complain?
1
@Paul Yes, correct. But stealing technology, forced technology transfers, restrictions on foreign company ownership, as well as (previously) artificially depressed value of their currency were all major contributors.
The government of China was deeply involved in all of them.
Trump dont need no experts. He is a stable genius. Fire all the goverment experts and let Trump handle all of it. Hey even though times are good, let's borrow a trillion dollars a year extra, and see if we can make it look real good, and paper over the growing problems from having a government that functions worse and worse as Trump ruins it. That will make America's future great fer sure.
14
All I know is, what we've doing last 2 decades ain't working. China is beating us to the ground, stealing our IP. Democrats seem to have this utopian dream China will come around and join the nations, NOT! So lets Trump give it a try, see who lasts. Trump unpredictability may just be the thing to dethrone Xi.
3
@Bobb
Have you been shopping at Walmart for the past two decades? Where do think all of the cheap goods come from? We have become a country of consumers who need to buy as much as possible for as cheaply as possible.
2
Trump keeps claiming his tariffs are killing the Chinese economy. Now that is fake news! Compare the US and Chinese economies
2019 projected growth (IMF): China 6.6% US 2.3%
China wins!
Debt to GDP world ranking (Trading Economics): China 75th place with 50.50% US 11th place with 106.10%
China wins!
Debt per Capita (US dollars) US $58,200 China $1,326
China wins!
External debt (US dollars): US $19,765,000,000,000. China $1,840,000,000,000
China wins!
External debt as a percentage of GDP China 15% US 115%
China wins!
Yes, China growth has slowed but is still more than double the US rate of growth.There are only 10 countries with a worse Debt to GDP ratio than the US! Most interesting is most of Chinese debt is held internally by Chinese themselves whereas US debt is held externally. Anyone thinking the US will crash the Chinese economy has been drinking Trump koolaid way too long
12
@GP Thank you for these illuminating data. Another salient factor is that China holds the largest percentage of American debt (5%); which is equal to 1.1 trillion dollars. I would call that leverage.
2
@GP
In earnest, and I'm an Anti-Trumpist, but Wall Street had been selling that Kool Aid for much longer than Trump (except the tariffs).
What is bankrupting our nation is military expenditure.
And it the one thing that has bankrupted many empires before, including the Soviet and Rome.
2
@GP
PS. Thanks also for listing these numbers
1
It’s sad and funny all at the same time. Our president doesn’t have a clue, doesn’t know enough to know he doesn’t have a clue, and doesn’t have the patience or brainpower to learn. Gotta love our reality tv fake president.
14
The President, Mr. Genius of course thinks he's an expert on everything. Doesn't have to listen to anyone who actually knows what they are talking about. Hang on people, its going to get a lot worse before it gets better.
8
Maybe China better succeeds than Paul in teaching Trump economics
5
And now we're left with the conundrum: - 'How does a dragon train it's master?'
I don't know much about the Wharton School of Business (Finance) where Trump undergraduated with a C average - but I don't think he's their poster boy for academic excellence. No, I doubt that. He didn't make the Dean's list and for sure didn't deliver the 1968 valedictorian address. And he wants the world at large to pay homage to his inherent genius in all things financial? Mr. President - don't hold your breath.
6
Let's see the American corporations took lots and lots of jobs to China to increase profits. Wonder what they are doing in their board rooms now? Do you think they are hunkering down to take a hit to demonstrate they are team players and the U.S.comes first? Or do you think they are looking at the situation in China and wondering where else in the world they can get more bang for their buck? Trump being the stable genius and all.....do you think he will be one step ahead of them or about a mile and a half behind? My guess is the little orange haired boy putting someone else's fingers in the dike that is the American economy will get tired of the leaks and go back to the sandbox at his golf courses. Messes are, and have always been, someone else's job to clean up. Oh, Jeeves.....
8
Siding with the Chinese dictatorship just to fabricate a point demeaning the US: Why is this worthy of serious consideration?
4
The Chinese have never been creditably accused of stupidity. They are waiting him out, for 2020 OR His implosion, whichever occurs first. By the way, he has proven himself incapable of learning. You can’t teach an old deplorable new tricks.
Seriously.
13
I do not know soybeans from retried beans but I know that Trump has bought off the farmers.
Sad but true!
5
@DDC The fact you mention is very cogent and too often overlooked. The 16 billion dollars Trump is giving the farmers for their losses due to his tariffs are coming out of taxpayers pockets; including the farmers themselves.
I also wonder who appropriated the 16 billion dollars? Financial legislation supposedly originates in the House. Did the Democrats vote this give-away?
2
@voyageurx
It's 26 billion, and counting.
1
... but he doesn't seem to be learning.
Ummm ... Sez this instructor: Trump is not merely ignorant - a remediable condition. Trump is not merely stupid - harder to do, but still fixable (memes to the contrary notwithstanding). Trump is that rarest of beasts: he is unteachable.
13
Krugman"s academic theories of globalization and "free trade" have been implemented for decades now, and the indisputable results are that they have decimated the American middle class, destabilized the developed world, undermined democracy, thoroughly discredited capitalism, and most importantly fueled the stunning ascent of China, which has altered the course of history.
It must be difficult for economists to acknowledge that they have been nothing more than "useful idiots" for China for several decades now.
But still, it would be nice if just one of them had the decency to issue a heartfelt apology for the massive human suffering they have caused in the past, and will cause in the future.
Fortunately for them they have Trump to use to distract attention from their monumental incompetence.
For now, anyway.
But the day of reckoning for economists will soon come.
And it will not be pretty.
At all.
7
@TB
China and India were the largest economies throughout human history until the free native American land and free labor wiped out their economies. China didn't rise with US help. That is just delusions of grandeur. China is larger than the US, has huge internal resources, much larger internal market and the talent base to rise on its own fuel. It was only a matter of time. Why do you think the Asian giants have been around for over 5000 years?
America created the modern trade rules and is the biggest beneficiary of global trade because we are only 5% of world market but we have managed to sell to the other 95% and prosper. Do you really think we could be as prosperous with just the US market?
The iss ue is not global trade, but the distribution of benefits going to the top 10% while the others are stagnant. Every country manages this distribution much better than the US. Japan is a large economy but has only 40 billionaires while the US has over 700 Billionaires. US economy is only 4 times the size of Japan but has over 15 times the billionaires. THAT IS THE CRUX OF THE PROBLEM. Japan manages the income distribution so much better by across the board profit sharing with employees.
4
@TB You started with a lie. It is not Krugman's policies that have been implemented but those of the greedy financiers of wall street who fund the GOP. Laffer's laughable curve which claims that the latest tax cut for billionaires will cause a trickle down that will enrich us all. Not happening, baby.
3
@TB Let's see... Attacks on popular economic models with no factual back-up, check. Ad hominem attacks with no facts to back them, check. Broad-sided threats to unnamed economists, check. Let me guess your Party. The Know Nothings...right?
2
Thanks
It is well written and very informative for the non expert.
3
What about a coordinated international response?
World wide revulsion ought to count as a coordinated response.
3
I have been exporting to China for the last 15 years. Amazing that everything this guy wrote is completely wrong. The author might want to start with the reasons we are trying to renegotiate in the first place.
2
Nothing will happen until it really begins to impact the economy in a big way. His loyal followers are too busy cheering his racism and can’t understand economics and how it affects them. His Republican toadies in Congress can’t do anything positive to save their souls.
And then it will be the Democrats fault anyhow.
10
@JKile
Evangelical leaders have been telling their sheep that Trump is the reincarnation of a biblical king named Cyrus the Great, and thus ruler by divine right. In a divine-right monarchy it is considered sinful to criticize the ruler.
Meanwhile the NYTimes helps the evangelicals out by ignoring that any other branch of Protestantism even exists. Every time I see a "religious article" in the Times, it's about either evangelicals or Catholics.
1
Thank you, Mr Krugman. Maybe someone in DC will read this to the Wharton Graduate in Chief.
3
Trump is like like the Dr.Evil from the Austin Powers Movie. 10%, 25%, 50%, 100%, 1000% and more. That is all he knows.
3
The only complaint / wish about yet another insightful - and alarming - column I have: please don’t quote tRumps tweets verbatim. The language - consisting of the limited dumb infantile vocabulary he and the about 2/3 of his base use - is physically painful as if this sick monster is in my brain. Indirect citing without direct quotes would do the job just as well.
2
@CitizenTM
Maybe, but quoting him directly also makes it clear how uneducated he is.
1
Donald Trump can make a fool of himself all alone, thank you, no Chinese sophistry needed.
5
Not sure whether Steven Mnuchin is one of the “people who know anything about economics” — something one would hope for from a Treasury Secretary — or one of “the band of ignoramuses he has left.” But certainly he is a Trump-enabling toady, since he was bullied into labeling China as a currency manipulator many years too late, when it is now no longer true.
On the “ignoramus” side of the ledger, both Mnuchin and Lighthizer were breathtakingly underwhelming during their face-to-face talks in Shanghai.
As usual, they got firm guidance from their boss (definitely a member of the “ignoramus” group): “I don’t know if they’re going to make a deal. Maybe they will, maybe they won’t. I don’t care.”
5
@1954Stratocaster I agree with much of your assessment. The trouble is that US policy for years has been oriented towards sustaining the profits of large donors who buy/manufacture in China and keeping retail prices low at Walmart and Kmart. Repeatedly, presidents and Congress have sold Americans a policy that allowed the Chinese to break rules for which Canada, Mexico and the EU would have been excoriated. Trump taps into this frustration with this 'cheating' but only with the skill and insight of a toddler.
2
Mr Trump has never understood what “winning” really means. His ignorance is astounding.
4
They can teach anything they like but the fact is the Chinese need the USA to keep their economy going as the USA can found different countries to produce the goods needed
2
@sym Your statement is the exact reversal of the actual facts.
@sym
Name two, and how fast?
Bullies are never well likes and eventually get their due but sadly the USA will pay the price as most nations see Trump bullying his way around the world. Only Putin and Kim find favor with Trump since these two dictators are hero role models for how he wants to govern the USA. Bullies get overthrown and those who were bullied hope to get payback. Trump out of office is a blowhard nobody not an esteemed statesman no longer feared out of power his tweets tossed in the trash. Lawsuits and legal actions will pursue Trump to the end of his days he will get no peace unless he gets a penthouse next to Putin in Trump Moscow Tower. Trump bankrupted casinos and paid 25 million to settle fraud cases while losing billions 10 years in a row what company would let such a blowhard liar run their corporation. Trump inherited his wealth and is spoiled brat unfit to be anything than an heir.
6
@REBCO
"the USA will pay the price as most nations see Trump bullying his way around the world."
And part of the problem is that most of the world does not understand out Electoral College mess. For example I read an article quoting Irishmen expressing bewilderment over why the US elected an idiot as its leader. We didn't. We elected Hillary Clinton, but Trump got into the office due to a Constitutional flaw.
2
Teach? Trump? That's doomed from the start.
4
Sometimes effective communication requires climbing down from the high ground and speaking in language your foe can more easily process:
"But I very much doubt he has learned anything. His administration has been steadily hemorrhaging people who know anything about economics, and reports indicate that Trump isn’t even listening to the band of ignoramuses he has left."
Thank you, professor.
6
Trump is playing a dangerous game. If Trump makes the Chinese mad enough they can wait until a month before the election and then make a big devaluation of the Yuan or something else that would collapse our economy. As Dr. Krugman pointed out, they have a lot of cards to play and we don't have many to counter with. If I were Trump, I would be trying to find a settlement with the Chinese before October of 2020.
7
It is entirely possible that the calculus behind China’s lackluster response to Trump’s tariff actions reside in the belief that any more robust response could lead to an ouster by Trump by the American voters in 2020.
Why would China interfere with the unraveling of the American economy and democracy - and the diminution of America’s respect in the world - when Donald Trump is single handedly engineering those outcomes through his own foolish behaviors? China’s response to Trump’s idiocy may be less economic than political.
13
@RHD Agreed! And, Trump's idiocy, likewise, is more political than economic. Solely designed to make the base "feel good"
1
Every recent administration has rightly had a beef with China’s protectionist policies, and has routinely negotiated and jawboned for a more equitable arrangement. It’s been far from perfect, but both countries remained on a trajectory of growth and relative prosperity. I agree with Krugman that this administration, by bringing us to the cusp of an outright trade/currency war, has zero idea of the consequences of its actions. It’s stupid - and that stupidity has driven me out of equities and into a place where one parks one’s cash.
8
China is the largest foreign owner of American debt , $ 1.1 trillion.
This can be used perhaps to convince the GOP not to pursue and totally erase trump’s delusional ideas about tariffs.
2
Trying to teach Trump even simple principles of economics is a fools errand. I'm certain that his professors at Wharton, most of his numerous attorneys and a number of bankruptcy judges would all agree.
8
Donald Trump cares about optics. He cares about his TV ratings. But, if the last few days have shown anything, it is that he can't control his own impulses any more than any of his advisers can. Given the simple task of standing up straight and shaking hands a few dozen times, while congratulating various people for their bravery, he stumbled along tweeting and ranting from within his self centered bubble. He says of himself, that he listens to his gut. Believe that. No amount of information, intellect or rational thought is going to effect him. And, that is how he is going to conduct his great trade war with China, hopping along, randomly, from tweet to tweet, as his gut directs him.
9
Trump looks at China the same way he looks at small contractors. He thinks he can bully them into submission because they have very little recourse. Unfortunately, facts won't change his thinking.
9
Overall rubbish article with few specifics. For example; how has China has not “gone all out”?
They’ve ordered companies across the country to not buy American and they’ve complied. US imports are plunging by 20% per month compared by a few percentage declines in US exports to China. That’s because China doesn’t need to set an overall tariff rate to go full out because they are not governed by the rule of law. CPC political appointees sit in every company board in the country. In addition, most US goods entering China ARE being subject to tariffs at similar rates; China reached that point early on in the trade war trying to match Trump’s tariff increases.
China could also punish US companies doing business in the country but doing so would harm domestic employment as well as send foreign investors fleeing at a time when their economy is slowing with massive debt problems and they want to attract more investment.
Again, they could implement more tariffs (as could the US) but this looks bad at a time when China is trying to deny that it is protectionist. Instead, they can accomplish even more by simply issuing under the table orders for their companies to not buy American.
They could devalue their currency by more, but that risks capital flight and a loss of spending power by consumers at a time when China wants more consumption to rebalance their economy. Loosening up financial conditions is equally risky long run due to debt risks and China's massive property bubble.
1
And here I thought Trump would bring us down by carelessly engaging in a disastrous war. Looks like the disaster will be totally self-inflicted.
3
China is no angel. It is an autocracy, suppresses freedom and has evil designs. But on this US -China trade war I think the US is on the wrong track though right in purpose. The world needs to stop China on its tracks in many areas like thieving technology but there is a method of doing this. Trump is charting the wrong course. Imposing tariff thereby taxing the public is the wrong way to go. I always hold that China can endure the pain far longer than America can. It is better to sit across a table and carry the world with you to find a solution to the China problem than a one-man brigade of Trump eventually failing in its objective.Trump has no clue how to tackle this as he has no knowledge to understand global finance. His inability to fathom how different governments work and lack of experience in relationships with countries but at the same time have the confidence that he alone can combat and win his "tariff war"will end up in a disaster for the US. It is time Americans stopped this President from forging this wrong path.
5
@Venugopal
"China is no angel." That is correct. And we desperately need to deal with problems with our trade with China.
But most of the problems what we have with China trade are also problems that many other countries have also.
We need a President that has advisors who know about serious trade issues with China and a President that can unite other countries with us to deal with China.
That is the only way we will ever have a good trading relationship with China. We should have stayed in TPP.
8
Trump persistently denies the most fundamental insight of Adam Smith: that both parties to a free exchange come out wealthier for making it. Every first year Econ student gets this in the first week of class. But Trump's zero sum world view is so deeply ingrained that he cannot understand it. For him, every transaction must have a winner and a loser--and more (likely based on his own life in real estate)-- the seller is the winner and the buyer is the loser.
It has been hard for him to get economic advisors willing to let go of reality, but in Munchkin--a mid-level New York banker turned low-level Hollywood producer, and Kudlow--a guy with no degree in Econ who plays an economist on TV, Trump has found his stooges.
9
@The StormVery astute insight. Donald Trump does see the world (and people) in terms of winners and losers. Unfortunately, America will be the loser in this transaction.
2
This column serves to remind me of the substantial challenge facing all knowledgeable people attempting to examine and explain the Trump presidency. To be specific: How many different ways can one say that Trump is ignorant, incompetent, incurious, lacking a clue as to how the world actually works and is, therefore, unqualified for the office which he holds?
I am grateful for Dr. Krugman and others who continue to expose Mr. Trump for the fraud that he is.
8
In regard to why "China has not gone all out", this could be a case of what my high school history teacher's favorite sain that "God takes care of fools drunkards and the United States of America."
That is I agree with everything said about Trump being ignorant on all things economic. But this might be a case of dumb luck as China'a reaction to Trump I believe has more to do with what it imports from then imports to America. Because of reasons unrelated to trade, American agriculture as most subsidized business on the planet. Therefore, what China imports from America is food.
It is one thing to tell your people steel will be more expensive and you may have to wait to buy that new IPhone. It is something all together different to tell people you have to pay more for vegetables or wait to eat or even eat less.
That is in my view, it is dumb luck caused by policies going back decades resulting in China only real means of retaliation would make food more expensive if not scarce for its people. Furthermore, saying that Chinese leadership cares not for, or feels they have nothing to fear from 1,000,000,000 people starving is as ignorant as any utterance of Trump.
The only way for this trade dispute to get better is for Trump to leave the presidency. Trump's thinking is well in line with the average 13-year-old boy, so it makes perfect sense that he thinks math is a hoax perpetrated by the deep state.
6
Regarding the Chinese/American Trade War, it's a given that the Tariffs Taxes on Americans is meant to offset the treasury deficit Tax cuts caused. It appears to me that Trump quickly diverted the nation's attention from that fact they quickly realized, by calling his Trade War which left everyone with the sense that the tariffs were a weapon in his fantastical Trade War. It's all fantasy, but that's how it appears.
China knows this as they are on the receiving end of Trump's hysterical incoherent and deceptive duping of Americans. But China is a long lived wise nation of knowledge especially aware of human conduct. They know Trump probably as a simpleton, and I believe that they, just as many of us, know that these times will pass when Trump leaves office in 2021. They are a very long lived patient nation.
2
We are fortunate that the MAGA farmers are so willing to carry the load for the rest of us. trump himself would never carry anything, but the farmers are strong (as he repeatedly tells us).
4
Teach economics to a guy who couldn't make a gambling casino profitable without his daddy's help?
Doesn't seem likely but I tend to be a pessimist.
Saw a guy in the local gas station the other day wearing a T-shirt that said, "When I want an expert opinion, I talk to myself."
No, it was not Donald.
5
" and reports indicate that Trump isn’t even listening to the band of ignoramuses he has left."
But Trump needs the ignoramuses he has left because someone has to talk to Trump's base supporters ,who need to have someone speak the same language as them, which is essentially economic gibberish. The world may be listening to everything Trump says, but he is only talking to, and for the benefit of his choir. All he has to do is preach to his choir. Nothing, including economics matters to his choir because they live in a psychological la la land. Trump believes, and he may be proven correct, that there are enough "believers" in his voodoo administration to keep him going for another four year term. Besides, for Trumpites, if he should "fail", they can always rely on the Democrats to bail them out once again.
3
Thank you, Dr. Krugman. I want to complain about the reality you portray, but that's just whining. It will definitely be interesting to see where it goes. My prediction: Chump will do something completely unpredictable and mind-bendingly stupid. That seems to be the pattern. All it has to be is egotistic, nothing else much matters. God help us.
4
There was a China long before there was a United States. The Chinese are proud of that. Given their size, history, astonishing growth in the last four decades, and the bitter taste left by western imperialism in the late 19th century, it would be foolish to expect them to meekly buckle under to American bullying.
5
Donald Trump is the best example of the old adage about being unable to teach an old dog new tricks. The sad thing is that you can teach an old dog new tricks if the dog wants to learn. Trump doesn't want to learn.
6
When I read this column by the Good Professor, two analogies to animals came to mind. One is that the only thing that a grizzly bear respects is a bigger bear; the other that is if you want to teach a mule something, the first thing to do is hit him hard on the side of his head with a two by four to get his attention.
Of course like the grizzly, the only thing that The Donald respects is force and the only way to get his attention is the application of the two by four.
China is wasting time trying to teach him anything. He will only respect them when they apply maximum pressure and hit him with the two by four. Lets face it, The Donald, while clever at superficial PR and a star as a pretend businessman on The Apprentice, is not a very intelligent person. He is a clever con man but he is not that good; most people can see what The Donald is up to. The really good con man is the one who cons you and you don't know that you have been conned.
Even if he was intelligent, his extreme egotism and narcissism mislead him about what is reality.
China is making the same mistake that the European countries and, indeed, many people seem to make. They keep hoping that The Donald will come to his senses and learn something or become a normal person. It is not going to happen. The man is not capable of developing rational policies and pursing them logically.
7
Th party of Trump (use to be the Republican Party but now the Radical Right) has shown it's inability to lead. The only accomplishments in 3 years (2 years of absolute power) are tax cuts, building a bit of wall, arresting immigrants (and locking children in cages), denouncing past allies, starting trade wars (a tax on the poor), condoning white nationalism, destroying the FED and other institutions, condoning obstruction, trying to destroy health care, destroying the FBI, teaching children lying is OK, condoned mahogany, and on and on.
What they have not accomplished. Unifying Americans, passing an infrastructure bill,(protecting our democracy from foreign influence, concern regarding the shooting deaths of our children.
6
Trump doesn't really have a problem, not until his base starts complaining. Remember those $billions of tax breaks he gave away to the wealthy, peanuts compared to the blessings that went to businesses. Trump knows he has a year to turn this around, that will be when his base starts feeling the heat. And has these tariffs changed China's business model with American companies as to intellectual property, trade secrets, copywrite, trade secrets, etc. Hardly. And China's exports to the U.S. is only 20% of their powerhouse. Wait until those tariffs hit the U.S. consumer. Trump will have much more to worry about than
a couple of whackos shooting people, racism directed to immigrants, or his staff defections. Happy Days are waning for Trump and the GOP. Now all we have to do is wake up the Dems that an election is coming in 2020.
5
While the objective of getting a level playing field with China was admirable the method of getting there has failed.
2
China is going easy on the USA because they want Trump to remain president. What better than having a fool running the main competitor.
7
The whole world (friends and foes) are hopping and waiting for the Americans waking-up to their senses next November and get rid of this bulling, racist, clueless mad man they elected.
Unfortunately, he has already created such a chaos domestic and worldwide on so many levels, so nobody can estimate or foresee the magnitude of damages until he is gone.
The worst enemy we have is the House of GOP, they could for once, trying to live up to the patriots they claim to be and realize that this not about democrats or republicans anymore. It is about our country, our neighbors, our friends and finally about the feature generations inheriting the great legacy of this country which is dismissing and destroyed.
As the great man in White House said recently “the whole World is laughing at us”, for once he is right.
4
Trump's trade war is just another specious ego trip in the man's infantile consciousness. His value system is as quaint as America's measurement system.
3
To see who is winning the trade war, just look at the stock markets. Xi is quickly bankrupting China for the sake of his personal power and that of his cronies.
1
Some people learn more quickly than most. Others are slow learners, who have trouble grasping facts even after being shown evidence for such facts that would be sufficient to convince normally intelligent people. After the”birther” controversy, should we be surprised?
3
With their humble currency devaluation, China sent a warning shot across our bow. Trump will claim "bone spurs" and once again force others to perform the tasks that he is either incapable or too cowardly to do.
2
There is one other little item that hasn't been mentioned, China holds over $1,300,000,000,000 over our debt. Think that can be used as leverage? Stupid question...
1
A critical point missed is the elections in 2020. China is playing the long game. Trump will be gone soon (fingers crossed) and US foreign and economic policy will likely normalise. This is the major geo political strategic weakness of any democracy against China.
1
Badly Worded Heading: It appears to imply that China is trying to teach Trump-style Economics.
Thank you. This is a well-written, easy to follow and important article. I was thinking that it is one that everyone in America should read, but then, on further reflection, I thought why bother; it wouldn't do any good vis-a-vis Bonespur's Base. The Religious Right is concerned only with controlling everyone's morals and women's bodies. The Rich are thinking, "it's been awhile since our last meaningful tax cut." The NRAers are thinking, "my guns, my guns, my guns!" while puzzling over the term "well-organized militia." And the Radical Right is too busy trying to learn the words to Amerika Uber Alles to read and digest such an article. So, I'm afraid that, again, you're preaching to the choir. Now if you could somehow fit it on to a bumper sticker...
5
One would think that everyone in the world is in awe of the US, and that everyone would want to sever their links with their communities, their society, their extended families , their culture, just to have a chance of being part of the America dream. Sorry, it’s just not true.
Whilst paying at a gas station the other day, after spending a month in California, I mentioned I’d just been in the US. The employee, clearly one of the diverse ethnic fabric of Australia now, looked apprehensive, his sensitive face showing suppressed alarm breaking through. “What’s it like there?” asked. I mentioned the racist murders in Ohio and El Paso were devastating to me. I asked him if he’d experience racism in Australia. He seemed to answer honestly, although one can’t be sure, because we have racists here, “No, I haven’t.” I could believe him. I think what informs Trump’s economic policies is exclusivist, selfish, and racist.
I find it so hard to believe the US system would spew up something of the ilk of a Trump. It is dismaying to me considering all the wonderful friends and people I have met that this could be so.
Doesn’t Trump realise that the rest of the world does not need the US. Just look at what China and India are doing in Africa. Both are driving huge development there, lending huge amount from their banks. I think Brazil will also be a huge player in the future. This century will show the demise of the US as the major economic power in the world, The future will be Asian.
2
Doesn't Very Stable Genius have a degree in Economics from the Wharton School. Has this School considered rescinding the degree? Clearly, Trump learned nothing as a student. The Chinese are wasting their time trying to teach him anything now.
3
Trump needs a strong economy to win the election in 2020 and stay out of jail in 2021, so he will eventually cave in on the trade fight with China and declare an imaginary victory. His ignorant, propaganda-fed, cultish base will fall for it. It's certainly possible that Trump's tariff fetish and toxic masculinity will get out of control and lead to an economic war, but I think his feral need for political and personal survival will prevail over these other impulses. He will cave in on the trade war and declare victory.
2
I'd like to know why American farmers can't sell soybeans to buyers who formerly relied on the other nations to whom China has now turned.
Is that truly not happening yet?
Soybeans are a commodity.
Hello? VP communications or chairman of the soybean 'council'? Agri-business professor? Mr. Krugman? Anyone?
Trump's ignorance is exceeded only by his belligerence. But if he destroys our economy, along with his reelection chances, it will be a small price to pay. We must rid ourselves of this president and his criminal republican party.
4
Krugman is almost certainly right about Chinese intentions. That little currency shift which sent global equity and bond markets into a tail spin was just a signal. If we choose we can create all sorts of turbulence in the US economy. I'm not sure Trump didn't get the message, it seems to have spooked him since within hours he and his stooge Kudlow were making nice. He has no clue what he's doing and thus doesn't understand the consequences of his action. Maybe Lighthizer does. Hard to know.
4
If Trump would only look outside his window he would see that the US is in need of massive infrastructure repair ; bridges and roads are crumbling, the water infrastructure is inadequate for future needs, ports are becoming antiquated at an alarming rate ... yet he does noting...why ? No doubt the expanding deficit that he engineered with his tax cuts for the wealthy is a huge barrier to projects that will grow the deficit . Instead of infrastructure he has offered us trade wars and currency wars both of which divert the national attention from our the real needs.
China has bee a convenient scape goat , easy to tar and feather as though they are the cause of our ills. China as Nixon knew is a great power in evolution. They have become a major economic power and have embraced globalism but rather than partnering with them, Trump has looked for ways to paint them as enemies. But China is not alone in this, Trump"s trade wars have painted as enemies all our trading partners , from europe to mexico and Canada.
Trump wants us to believe that we are economic victims of the world. He wants to divert attention from infrastructure and ballooning deficits. The triggering of global recession and currency war , may well be the result of his policies, but he could care less, What he does seem to care about is avoiding addressing our real issues and for this he is willing to sacrifice world recession and the american farmer!
7
@Walter Nieves
" yet he does noting...why ?"
According to the book "If We Can Keep It", the barrier is not in the White House but in Congress, where the Republicans have promised their rich donors not to embark on any project that would involve raising taxes. The author of the book said this promise has received little attention, and he is right.
1
I would love to read a column by Mr. Krugman that explains what the advantages to the US might be if Trump or another president swallowed hard and joined the TPP. Trump is not a team player but a future president might be.
5
Lost in the hysteria among some Democrats and Democrat leaning columnists like Frank Bruni over a possible Trump win in 2020 is the fact that Trump has fulfilled essentially none of the promises he made in 2016 and has made since. There is no wall paid for by Mexico, no repeal and replacement of Obamacare, no new infrastructure, no denuclearization by North Korea, no halt to Iran's nuclear program and no reworking of US-China trade. I suspect his recent tariffs on China represent an attempt to force China into a deal before the election but even he knows they won't do it.
Unlike covert Russian attempts to influence the last election, the Chinese approach appears to be quite overt. Hurt Trump's base while demonstrating that Trump the strongman is powerless to stop it.
151
@DavidWiles And yet, his base thinks he's the "greatest president in history" as I recently read in an NYT interview with some Trump supporters. Is there something in the water or the food that is causing people to think this way? I haven't seen one thing come out of the Trump administration that has benefitted the his middle-class base, yet they're ga-ga for him.
7
@DavidWiles
Actually, one accomplishment -- he appointed the anti-abortion judge that he promised. But his critics downplay this because they want to blame his Electoral College success on racism, not the abortion issue.
2
@David DiRoma Let me append a comment in a local news ticker that is typical of "the base," and demonstrates just how childish and resentful it is. Which should always be remembered.
"Unfortunate we couldn’t have had Tim Allen (running a local community movie house) as opposed to Michael Moore. Liberals would have a hissy fit and that would have been fun to watch."
For the trade dispute to get better, Trump will have to back down and I just don't see that move in his game. He thrives on always being right, or first, on top and in charge. I can't imagine that he cares all that much about the farmers and their soybeans. If he loses the stock market and continues to alienate his wealthy allies and friends he may be forced to re-evaluate his actions. Like a caged animal, when cornered he will be more dangerous than he is now.
469
@Jo Trump thinks he can continue to buy the loyalty of American farmers (and those who sell to it) by sending them cash money. And he is convinced that they care more about judges, guns, and evangelical rural culture/values. But, the cash he sends them largely goes to the biggest agricultural assets--of course--and smaller (but still substantial) soybean producers now have no market. Together with the effects of massive flooding which has delayed planting and ultimately harvest production, the farming community knows that it is in real trouble, not only now but also next year and perhaps beyond. Farm income has been shrinking for the past two or three years anyway, so this is all coming to a head in rural communities all over the country. Dairy farmers are going bankrupt--two every day. Even if a well located farming complex is surviving, everyone in town knows someone who just went broke. Major Media is not covering this looming disaster in any depth, and it is all coming due on Trump's watch: the con-man from NY who said he was their protector! This is very bad for American Agriculture, and for America's city dwellers. It can have a major impact on 2020.
311
@Ira Lechner In market based economics, there is a rolling disaster that has been striking workers for over a century, now well heeled farmers. Trump was elected because of this long frustration and alienation. If you're in and doing well, one is smart and made the right choices but the population at large is growing the dumb and dumber. Or are they? It is a system that might throw a peanut at the dispossessed but policies and government actions show they really don't care.
9
@Ira Lechner-Indeed. "More than half of the Trump administration's $8.4 billion in trade aid payments to U.S. farmers through April was received by the top 10% of recipients, the country's biggest and most successful farmers....
Highlighting an uneven distribution of the bailout, which was designed to help offset effects of the U.S.-China trade war, the Environmental Working Group said the top 1% of aid recipients received an average of more than $180,000...Shipments of soybeans, the most valuable U.S. farm export, to top buyer China sank to a 16-year low in 2018....The new (bailout) round also increased the maximum amount of aid per individual or legal entity to $500,000 from $125,000 in the package last year."
https://www.yahoo.com/news/bulk-trumps-u-farm-aid-181833974.html
20
It will be interesting when Trump is no longer president. His successor will have to go to each and every country of importance to the US and say "Can we start over? Please?!"
923
@Pajama Sam If I was the leader of one our former allies or trading partners, I would have to think long and hard about "starting over with a new president." The same electorate and the Constitutional "flaws" will remain in place. There's no reason to believe they won't produce a new President Bonespurs four or eight years down the road.
73
@Pajama Sam
One hopes they will first demand systematic reform that will prevent the fact-challenged Trump base from exercising its unearned minority influence. Direct popular Presidential elections and federal anti-gerrymandering laws would be a good start.
75
@Pajama Sam. “Can we start over again?” With such a large part of our electorate still pledged to the amoral, ruthless GOP why would any foreign govt trust the US? As Trump has shown a significant portion of the US electorate can be easily manipulated into doing just about anything: Agree to an unnecessary war, ignore or cancel agreements, and commit war crimes.
A new potus better find s magic wand to help dig the US out of this deep hole.
46
Yup. I've been saying my whole adult life that I don't really understand economics (having never studied it). Yet, I'm very sure that I understand more than Trump does. He continues to claim that the tariffs mean that China is pouring billions of dollars into our treasury; he seems to think that it is good if China's economy is slowing and ours is not (equates that with their losing and our winning), but, of course, it is not good news for anyone when one of the world's largest economies slows. He may not like globalization, but that is the world we live in.
Donald Trump lives in a black & white world where all of life is a zero sum game, but the real world is far more complex and messier than that.
892
@Anne-Marie Hislop
It's a black and white casino where the whites gamble, the blacks serve drinks, the zero sum is inclusive of the house take, and the whole thing is a house of cards. That's Trump's business record.
51
@Anne-Marie Hislop - Aldous Huxley, 1956, BNWorld, Revisited: "The demagogic propagandist must be consistently dogmatic...... There are no grays in his picture of the world; everything is either diabolically black or celestially white...He must never admit that he might be wrong or that people with a different point of view might be even partially right."
64
@Anne-Marie Hislop
"Donald Trump lives in a black & white world..."
I disagree. He lives in a world of Donald and Not Donald. To him the only reason other people exist is to validate him or provide him punching bags. I've never seen a pureer narcissist in my life. Textbook.
61
Without Manafort not a single one of Trump’s advisers is well-versed in the complicated art of the trade deals. Blagojevich should be extremely helpful.
8
With the trade situation China and the U.S have occurring, people tend to believe that Trumps actions and views are incoherent and incomprehensible. The U.S has announced tariffs, on everything China sells with rates not seen in generations, and China's response to it is somewhat modest considering the state of affairs. The U.S as well as president Trump have not been taking things into consideration. Instead every time China gives an opportunity for the U.S to take action, the U.S "pushes even harder" making the trading situation more difficult. Trump is complaining about how currency is rising and that is one of Trump's concerns as well when he took it to twitter. China is not like the country Mexico, that sends 80 percent of exports to the U.S, so therefore these actions hurt China and the money that comes in and out of it. But China is also an economic superpower and poor in comparison to the U.S. China can buy some of its goods somewhere else hurting American farmers, or the weakening of the yuan that hurts the U.S. Therefore this is why the U.S power is limited and puts Trump in a weaker position than we expect.
2
To understand Trump's logic one must accept Trump's goals and the promotion of democracy isn't one of them. Nor is support for the Rule of Law, solving Climate Change or improving the lives of those 320 million Americans he supposedly serves.
Trump has one goal and that is to retain the WH by any means possible. A 2020 loss means certain prosecution so no maneuver will be too radical for Trump.
Provoking a war fits perfectly because the War Powers Act provides even more latitude to a president whose expanded executive privilege beyond any prior realm. He will shred the constitution in the blink of an eye and he's already hinting at dispensing with our Free Press.
It is suicidal to underestimate Trump's resolve to retain power. Therefore, impeachment needs to start immediately. Enrage enough Americas who will demand his removal.
81
@constitutional law student
"A 2020 loss means certain prosecution..."
It also means no more leverage to obtain Saudi and Russian, (or anybody else's) financing to keep his real estate empire afloat, all of which is likely mortgaged to the hilt.
11
@constitutional law student
This senate will never convict, and Trump will declare martial law if defeated. He probably will have Ivanka, Junior or Jared run in 2024, if there will be an election.
1
@constitutional law student
Trump also fantasizes about throwing his critics in jail ("lock her up") or expelling them from the country ("send her back").
3
I still say it's worth a recession to see the end of Trump-- hopefully the Chinese crash the stock market in due time to lose Trump the election next year. I will gladly sacrifice 15% of my net worth to preserve democracy. In fact, I'm not sure there's a number where I begin to reconsider.
975
@sd
Bush's was more like 30-40% There's no reason to think Trump's will be less.
37
@sd
Sad to say the only chance to see the end of Trump is to have a timely crash on the stock market, but it is worth it. The stock market will rise again but Trump will be gone.
61
@sd
Yes!
Recently I visited widowed friends living in affluent retirement communities and was surprised to hear them leaning toward voting for Trump (which they did not do in 2016) because of their "portfolios!"
These well educated women disapprove of his racism, his mistreatment of immigrants, his divisiveness, and they even suspect he's corrupt. But somehow they can overlook all of that.
Only a stock market crash - or a recession - would stop their votes for Trump.
59
For the British it's "Brexit", the withdrawal from the obligations and benefits of being part of the European Union. Americans don't have a name for our new economic policies other than "Trumpism", but we could call it "Wexit", or withdrawal from the world. We are building border walls and economic barriers because of our insecurity in the face of rapid economic, climatic and societal change.
250 years ago America rebelled against archaic British rule. It's somehow a fitting irony that we are presently following Britain's lead into isolationism and irrelevance.
3
What I find amazing is that he and his advisors (past and present) really believed that protectionism is good for the US economy. Perhaps they never went to grade school?
3
What I struggle to understand is where the trade experts are who are supposed to be counseling and restraining the president. It is very scary to me the power that Trump has to make such bad decisions that could ripple through the global stock market. His policies are surely leading to an economic downturn.
3
@Eileen As stated in the article, the competent people have left trump's circus or have been fired. All, except the clowns, and he ignores them too.
1
@Eileen
"where the trade experts are who are supposed to be counseling and restraining the president."
They are hiding in their offices, cowering with fear of triggering the President's notoriously short temper.
1
I travel to China almost 3 times a month and what I hear from the Chinese is they have no one to talk to in this administration, and they are waiting this one out. They are hoping for change in 2020
like the rest of the world.
9
This remark:
"...if lots of money were flooding out of China, the yuan would be plunging, not experiencing the trivial (2 percent) decline that Treasury condemned"
...seems not to jibe well with this one:
"...it can boost its exports, to the world at large as well as to America, by letting the yuan fall." (Letting, notice.)
The first lets on that the exchange rate is not under government control (it in fact sets the rate daily). The second implies that it does have control, and has been trying to support the yuan, which in the absence of intervention would fall.
It's the second point which was accurate.
The first one, a rebuttal concerning capital outflows to the US, is unfortunately not accurate, and sounds like thoroughgoing partisanship. Yes, Dr. Krugman is subject at times to certain enthusiasms, as one will know from reading his columns for several years.
That's too bad, as there are plenty of things to legitimately rake Trump over the coals for.
2
@Dixon Pinfold
If it makes you feel good, you may have scored a few points on Krugman's column, but you have to admit Trump is dunderhead when it comes to trade policy and/or strategy. His track record of multiple bankruptcies should concern everyone.
@JRM
I hardly need to admit it; I asserted it myself in my closing sentence. Clear now that I point it out?
By the way, I have a pet hypothesis about Trump's casino bankruptcies. I can (very) easily believe he's not a great businessman, but running casinos should be profitable.
I therefore wonder if he didn't declare them bankrupt mainly in order to simply shut them down and stop making payments to various parties whose informal permission to remain open he permanently needed. You know, special Jersey 'taxes', paid in cash.
Considering that Trump's tariffs are really a tax on Americans, which will slow down the economy by cancelling the growth effects of the tax cut, I think that China is trying to get him to double and triple down. Notice that they haven't retaliated with new tariffs of their own... This is strategy straight out of "The Art of War"
4
And the popular narrative about China is way off base. Sure, their government is authoritarian and brutal. But China as a nation is a proud and powerful one -- with good education for many -- and a long-term desire for its fair share of world wealth and power. Nothing will stop their rightful place on the world scene. And it is not a dangerous one. We are the dangerous one -- just look at Trump and his supporters in the White House and out around the country, shooting up innocents and selfishly asserting itself to nobody's benefit.
10
@JustThinkin
What an irony. China and other communist countries claim to have repudiated capitalism, yet they understand it a lot better than President Trump, who claims to be an expert on business.
1
Mr. Trump has no economic strategy, only the tactic of tariffs. He wanders as the drunk who has lost his keys will wander the street in search for them. When a passerby asks him why he looks primarily under the streetlight (his tariffs), he tells the questioner it is because the light is better there. The bushes (macroeconomics) might more likely hide the keys but he cannot be bothered to look beneath them.
A random walk through a darkened economic neighborhood will not guide our nation's path in the world markets. It is time our nation sobered up, took the keys from the drunk's hand before he might drive the car into a tree.
7
Another possible reason that China has not significantly devalued their currency is so as not to inflame their other markets, notably the EU.
The European Union’s surplus with the United States grew to 62.1 billion euros ($69.8 billion) in Jan-May 2019. With China, the EU’s trade deficit expanded to 76.7 billion from 69.2 billion euros.
Devaluating Chinese currency would aggravate the trade deficit with the EU at a time when it depending on the EU as a balance against Trump's "fortune cookie" based tariff moves.
10
"But he doesn't seem to be learning."
Dr. Krugman's opinion and the comments thereto on Trump's trade war with China are based on the presumptions that Trump is able to think (1) rationally, and (2) intelligently. But these presumptions are incorrect (or wishful thinking).
The trade war Trump initiated with China isn't about helping the average American, as Trump is psychologically incapable of empathizing with the average American, or anyone else for that matter (a symptom of his well-known psychological disorder). It's about Trump's own grandiose sense of his self-importance, his fixation on fantasies of his success, control, and brilliance, and his desire for adulation (three more symptoms of his psychological disorder.) Trump's trade war with China is, also, about the fact that Trump is incapable of understanding even basic economics because he is not particularly intelligent (hence his obsession with hiding his transcripts).
China may be trying to teach Trump economics, but if so, they will soon find this an exercise in futility. Trump painted himself into a corner from the get-go ("Trade wars are good, and easy to win"). His disorder, coupled with his poor analytical skills, have led him to double down, and triple down.
At this point, Trump's self-inflicted economic catastrophe will not end until enough voters finally come to their senses and boot him out of office. But the damage he has inflicted may take decades to overcome.
42
@ALB
One would think that, by now, the pundits would have learned themselves that Trump is not going to change.
1
@ALB
But, it will take the flipping of Senate membership to re-direct the course of our nation.
OK, Mr. Krugman - we'll do it your way. We'll look the other way as China siphons our intellectual property out of our businesses and universities as the US becomes the uncompensated R&D department of the Chinese government. We'll look the other way as the Chinese military claims and militarizes territory 1000 miles from its own borders. We'll finance the well publicized strategy of China becoming the worlds dominant economic and military power. We'll turn away as that totalitarian government abuses and reeducates their citizens into compliance.
We'll go status quo. We'll stick with your plan. How's that working out so far?
8
@Web
With all respect, you seem to be new here.
Just google "Krugman IP theft", and you'll see all the serious, fact-based things we CAN and should do to end it.
ALL presidents and economists agree that we need a serious China policy, remember?
The only problem with Trump is that his approach isn't serious at all, and THAT is dangerous, very dangerous.
65
@Web
Well, there was that little Trump-enabled abuse and re-education project down in El Paso last week. When a leader just smiles as the crowd shouts “shoot them” I long for the status quo of saner times.
1
@Web - so your and Trump's solution to these problems is to engage in a tariff based trade war? Really!
Trump is personally and politically a reflection of his base, willing to support racism, and policy against it's own interest. But "we're winning too much." We are moving in a direction that maybe hard to change and we are heading in a direction that can only go one direction. Does anyone not believe we are in the twilight of this greatest economic expansion, over the past decade led by Obama, ending with Trump. This country, may give Trump an other term to complete his destruction. The line is in the sand, will America cross it?
10
@Steve
I don't think Trump is a reflection of his base.
It's his base that has become a reflection of Fox News' fake news, with Trump and the GOP literally coordinating their "messaging", 24/7, in order to make sure that from now on their voters live in an "alternative facts" bubble, allowing the GOP to behave in the most corrupt way possible in DC, accomplishing NOTHING of what they promised, all while having very high "ratings" among its voters, simply because they now fully control the narrative.
This IS a totalitarian way of governing.
A democratic way of governing understands that having voters who get access to proven truths, are encouraged to fact-check, consult different kinds of media, support independent journalism, and engage in real, respectful debates with each other, is CRUCIAL in order for the nation as a whole to thrive.
The main difference between the GOP today and the party that is controlling the Chinese dictatorship, is that:
1. China had DECADES already to try this out and make manipulation of its voters perfect (including through creating laws that violently suppress independent media and journalists), and that
2. China's leading class is NOT entirely corrupt and has a real vision for the future of its country (including world dominance ..), which means that they vitally NEED experts and scientists to get them there, whereas the GOP is only in it for itself and has become too cynical to still believe in "progress" for America as a whole.
41
@Ana Luisa
"This IS a totalitarian way of governing."
With all respect, you seem to have never wondered what the word 'totalitarian' means, for some unfortunate reason.
When dissent is not tolerated in the press, we shall be living under totalitarian government. Dissent is at present not repressed in any way.
I find prevailing in your posts a loose, meandering quality, and something of a reliance on things that go without saying.
"What they’ve been saying through their actions, in effect, is: “You think you can bully us. But you can’t. We, on the other hand, can ruin your farmers and crash your stock market. Do you want to reconsider?”"
This is a great article, showing what happens when the "dismal science" isn't fully appreciated. I don't think Trump ever left the high-roller world of real estate development and his lifelong patterns of bullying vendors, creditors, and customers to get ahead.
Just look at all the strengths China has versus those of this administration: patience, sense of history, excellent understanding of the laws of economics.
Because they are laws, like any science, even governing the more abstract and emotional side of the ecoomy: the stock market doesn't rise forever, there's no free lunch, tariffs hurt one's own country as much as the enemy, and going it alone is costly.
37
@ChristineMcM
Economics is not even remotely qualified to be considered "science".
Full stop.
And there are no "laws of economics".
It is, at its core, really nothing more than modern-day astrology.
4
@TB
No, it's a "human science".
That means that thanks to arithmetic and objective observation, you can have real debates, and real evidence refuting certain statements or hypotheses.
It also means that not everything can be proven, so you HAVE to rely on certain fundamental hypotheses, which ARE constantly debates, but cannot really proven to be true or false.
That's how for instance the non partisan CBO can calculate that Obama's Recovery Act would turn around a -8% GDP and economy that was shedding 700,000 jobs a month, and create decade-long, steady 2% GDP growth and about 250,000 jobs added a month, resulting in a constantly lowering unemployment rate.
And you CAN calculate the unemployment rate, and then objectively study its evolution quarter after quarter.
That's how it has now been SCIENTIFICALLY PROVEN that the CBO's 2009 predictions have been right.
It's also how it's now proven that when it comes to GDP growth or unemployment rate evolution, there is no Trump dent to be seen AT ALL ... . And THEN, of course, it all of a sudden becomes very convenient, for some, to imagine that human sciences aren't sciences at all. Funny enough, those who are claiming this are the same ones who claim that actually climate science, inauguration crowd counting science, etc. should be ignored too ...
52
Economics in most schools taught rely on rational actors. The problem is that there is enough noise in us humans that we don't always act rationally. Though something may make sense for us personally, collectively it works to our detriment. This is, for example, a cause for bubbles.
Trump only works for his own constant and immidiate self-gratification. It is a clear failure of our political economy that this man, who does not think about our collective interest, has become our collective president.
6
Trump has conducted his whole business life by using a bullying strategy. Once he has their money (e.g., investors and lenders), their goods (vendors) or they have performed their services (contractors), he thinks he is in the driver’s seat and can cut deals by slow-paying or non-paying them. This is why he often files lawsuits or frequently is a defendant in litigation. It doesn’t require much strategy or thought to employ such tactics—just money and lawyers.
Global economic and geopolitical issues are much more complex than stiffing the local concrete contractor. Navarro, Lighthizer, Kudlow, Ross, Mnuchin, Miller and Mulvaney are either incompetent (Navarro has been widely ridiculed for years by his fellow economists for being Tariff Man), past their prime (Kudlow, and Ross routinely falls asleep in meetings, apparently), egomanical (Miller and Mulvaney), or simply likes being near the seat of power (Mnuchin).
The farmers he is ruining mostly supported Trump, so I have little sympathy for them. Hopefully the rest of us will still have a food supply, and a functioning economy, when Trump’s Chinese Gettysburg gambit is over with.
30
@Jack Sonville You are correct that The Donald conducted "his whole business of life by using a bullying strategy." During his "business" career this worked because for example he could stiff a contractor (lets say your concrete contractor) then next time he needed concrete he would call a difference concrete contractor and stiff him.
But now that he is president, everybody of any intelligence (including world leaders) can watch the news and see what is going on. And the leaders of the these countries don't change very often and they have to be pretty good politicians in order to get to where they are now.
Actually, I think that The Donald doesn't give a hoot about policies and conducting government. He is only interested in himself being the center of attention and winning the 2020 election. He likes being president because he is the center of attention.
1
Earlier, Trump did learn to target his tariff sabre-rattling to China. Recall that he started out with much broader tariff threats, but has zeroed in on China. I think the point now is not so much that the U.S. wants a broader tariff war, but that the U.S. wants more access to the Chinese market, that China has to stop ripping off intellectual property, and that China has to have a more opaque monetary and financial system to join the global economic system as an investment center. My contacts in China suggest that these messages are getting across.
4
@Dave Oedel
The problem is that it's ONLY a "message". And an extremely vague one. That's NOT how international political agreements are made.
What would "getting more access to the Chinese market" mean, concretely, for instance?
That Chinese people start buying American stuff instead of Chinese stuff.
But WHY would they do so? China, contrary to the US, is a developing country. Americans like to buy Chinese stuff because salaries in developing countries are so much lower that Chinese products are cheaper than US versions - and what's even more, many of those jobs are too horrible for Americans to even WANT to continue to do them. So we outsource manufacturing to regions in the world where people have to choose between dying or taking this kind of jobs.
So what would buying more US stuff mean, for China? It would mean having to import more, so having to spend more. They do not HAVE the money to spend more. We buy so much from them because we are the wealthiest country on earth, remember?
So it's not because China would lower its tariffs, that its population would become wealthier and as a consequence buy more US products. Quite on the contrary, the risk is that it bankrupts local companies, and then GDP growth slows down even more.
As economists across the political spectrum have shown, it's the whole idea that "trade deficits" would be BAD, that is a hoax, a mere propaganda tool for Trump. Wealthier countries buy more than poor ones, BY DEFINITION.
31
Dave
No one disputes China’s long-standing unfair trade practices that Trump’s strategy seeks to reverse. However, Trump’s tactics are those of an ignorant incompetent, unfortunately for his supporters who,until recently, have made strong economic gains at the expense of the middle class. China can retaliate against those beneficiaries in a targeted way, because of Trump’s economic and diplomatic malpractice. I have no empathy for them whatsoever. What they sow, they reap,and Trump, I predict,humbly, will reap public humiliation this year and scorn in 2020 for his no nothing belligerence.
@Ana Luisa: China will own lots of American farmland at the rate Trump is going.
By focusing on some of Trump's rhetoric instead of the substance of the trade negotiations, this opinion piece presents a very warped view of why trade talks are at a standstill. As reported in the NYT and elsewhere, topics like IP theft, forced technology transfer, other cyber theft, non-tariff barriers and China's weak enforcement of its laws against violators were all being negotiated and supposedly progress was being made until China reversed course. There were fundamental dealbreakers that had nothing to do with the exact quantity of soybeans imported.
Yes, sure, China has not pulled all the financial levers it can to hurt the U.S., and yes, the trade imbalance is not 100% their fault, but to overlook the actual substance of the negotiations insults the intelligence of experienced negotiators, some of whom have been at this for decades. And it glosses over important truths that have little to do with Trump's hyperbole.
5
@aellinnyc
What this op-ed and many other articles shown, that is that China in real life never engaged in any serious "negotiations" with the Trump administration AT ALL.
And they didn't because they KNOW that it's all a hoax and that Trump just needs to be able to talk about it to keep his ratings high.
What they see is a president who on EACH AND EVERY negotiations he promised to engage in (and "win"), backtracked 100%.
They see how Trump didn't even try to negotiate building a wall, with his own GOP Congress (only 50 votes needed ... and the GOP had 52), nor didn't even try to get his own healthcare plan through Congress (which would, he had told us insure more Americans than Obamacare) - to then start supporting Ryancare, which would have destroyed 30 million Americans' healthcare - and then not even try to seriously negotiate that either.
He also didn't engage in any serious negotiations about comprehensive immigration reform - he even turned down a Democratic offer that including FULL funding for his wall, only because the bill contained the bipartisan Dream Act, supported by 80% of the American people and a majority of GOP voters ... AND after a pundit attacked the Dream Act in a mere tweet ...
And then there's the fact that Trump fires rather than hires "experienced negotiators", as he's allergic to "real facts", and that many jobs are STILL vacant, so he's not even going into negotiations with a full team ...
35
@Ana Luisa
Thank you, Ana Luisa, for the sustained quality and clarity of your contributions to this discussion.
Excellent piece as a survey of who holds the cards in this negotiation. Beyond what's said, my instinct is that the recent but modest currency message was intended to show Trump that the Chinese can stretch this out until Trump is so desperate for a deal in advance of the 2020 election that he will take anything the Chinese offer, with only a fig-leaf as a face-saving cover. By having the potential to do more severe damage to the US economy, the Chinese can control the one thing that can keep Trump in office. For more than a year, Trump and his collaborators (Mnuchin, etc), have played the US markets, especially the equity markets, with a drip-drip of favorable news whenever bargaining seemed shaky. Now, the table has turned and will turn even more as the days progress. I would keep a close watch on the months before the election, after January 2020. And once the Chinese have a better sense of who the Democrats will nominate, a real rough ride might be coming if the Chinese decide the Democrat will be a more reliable and knowledgeable negotiator. At that point, if Trump refuses to cave by more play-acting as a strong man, he'll lose the support he's been able to preserve thus far.
16
@Barry Winograd. The real truth in your comment is it won’t matter which Democrat wins the election. Each of those running has more intellect and common sense in one little finger than this president. The formidable task the elected will have to face is fixing the inestimable damage Trump has caused!
1
@Barry Winograd
What if his support is just as stubborn and ill- educated as Trump?
China set the stage for this over the last thirty years by developing relationships everywhere including very tiny countries (China Embassy in Antigua, as an example). Much of their sovern cash was spent on infrastructure and loans to the developing world. The economic elasticity of individual income in China is broad and without political consequence. They can print money without anyone actually noticing and have more scientist and engineers than anyone else. Education is viewed as valuable and progressive. However, the most import asset is political stability and citizenry alignment and trust in government. Trump is already viewed as a lame duck shortimer and screwup.
17
@terry brady. "... the most import (sic) asset is political stability ... and trust in government." You obviously have not been following the Hong Kong story. Political stability there is a very tenuous thing.
@Me
China is not worried about Hong Kong as Britain left the territory legally in their hands. Geophysical, the city*state is locked into, 'China' and nothing to be done. China is amazed at how easy Hong Kong has been and knew that wealth was a pacifier all along. Relax, China owns your pension fund and your children's employment future.
The Chinese have been reasonable at every step, and we have been unreasonable. This is the lasting impression that has been left across the world thanks to this trade war.
17
Dear Mr Krugman,
I have enjoyed your articles for a long time. Could you answer a question: why is nobody mentioning American sovereign debt when discussing China? I haven't checked for a while, but last time I did, China held massive quantities of US government bonds. Dumping these would presumably have an adverse effect on American ability to borrow at the current low rates, which it needs to balance its budget? Or not? Would love your thoughts on the topic. Thanks.
13
@KayKay
The GOP doesn't balance budgets, it creates debt, just increases the national debt which now has no cap on it. Besides, where are investors going to go to park their money and get safe returns, certainly not the EU. Besides, if Munchkin needs money, the Fed just prints more bills and makes a ledger entry on their books. Nice racket. Brilliant. No fiscal responsibility, no accountability, just like Congress.
2
@KtayKay China holds only less than 5% of the total debt of the US and is not in a position to dump all at once into the market.
The only thing that Trump demands from China is that it accepts to be used as a side character in the GOP's plot to win the next elections.
His trade wars were never designed to get any real benefit for America.
McConnell's Senate under Trump is even more "do nothing" than what McConnell did under Obama, when the GOP Congress already broke all records for obstruction of the legislative process.
Over at the White House, Trump won't have passed ANY of his signature campaign promises at all (no wall, no deal with Mexico to pay for it, no mass deportations, no comprehensive immigration reform, no repeal and replace Obamacare.).
On many issues, he even did the exact opposite (he doubled the deficit, instead of continuing Obama's cutting of the Bush deficit by 2/3).
So how do you win an election with such an abysmal record?
The answer is simple: fake news. The GOP has been building its Fox News propaganda machine for two decades now, and has successfully asked its voters to reject all other media as "fake". So just like the Chinese government, they can now create their own narrative, and their voters will believe it because their media will sell it as "real facts".
And GOP voters know that "deficits" are bad. So reducing "trade deficits", through random unilateral executive orders (requiring no negotiations at all) is a FABULOUS way to make them believe that Trump is doing something, and something great, that will increase jobs etc.
China is merely asked to sit it out.
33
@Ana Luisa - well said! McConnell's job has been to pack the judiciary and he has done that very well. The El Paso shooting and Trump's gloating over there; the ICE raids in MS and kids wailing there; the images of kids in cages; these are just a few of the many actions that are designed to poke the "enemies" in their eye so that the base "feels good" and continue to believe that he is making America great again!
4
President Trump’s legislated authority to impose tariffs on trade with other countries requires that they are necessary due to “National Security” concerns. His initial round of tariffs on steel and aluminum were shaky at best in that regard, but extending these ill conceived penalties to all imports from China can find no purchase on those grounds, and should incur push back, even from the spineless GOP controlled Senate. As it is, Donald Trump is being allowed to wield dictatorial powers by default.
16
It seems our best opportunity to corner China was in early 2017. If we had stayed with the T.P.P., or at least renegotiated it, we would have trading partners to help block Chinese goods. If China lost most of its export market, it might be more willing to make satisfactory changes, like ending the practice of forced technology transfer.
As it is, tariffs act as a regressive tax on consumers. Perhaps this helps offset, to some degree, the huge loss in corporate taxes put in place by the corporate tax cuts.
Farmers seem to be cheering Trump. Even if they forever lose their markets in China, even if they lose their farms, they are pleased that he fought for them. Go figure.
27
@Mary M
It seems absurd to try to “corner China.” To what effect? China and the US and the world are trading partners. Mutual objectives are sought by negotiation. Trump espouses isolation.
As I read Dr. Krugman's column, I imagined thousands of Chinese politicians, industrialists, diplomats, and economists working more or less in concert to produce a winning economic strategy for their country. Lined up against them is a small group of men, led by Trump and bolstered by the likes of Kudlow, Mnuchin, Moore, and Kushner, who know or care little about international economics--other than how it can benefit them personally. These American amateurs have thousands of American experts available to them, but they choose to ignore them for a hundred different reasons. So we have a large group of Chinese professionals, opposed by a small group of American amateurs engaged in a serious game of international trade. What could possibly go wrong?
101
So, China won't import our soybeans. Price of beans falls. 97% of soybean meal is animal feed. Thus, the price of poultry, pork and beef falls as well. A win for American consumers.
They haven't canceled aircraft orders, but Boeing, for some reason, seems to be having a bit of difficulty filling them.
China has stopped importing American cars, but China's car market has been in a deep slump for the past year and doesn't seem to be getting out of it. In other words even if there were no tariff dispute China wouldn't have imported that many American cars.
Figuring out the effects of changes in the terms of trade is really, really hard.
5
@ellen1910
"So, China won't import our soybeans. Price of beans falls. 97% of soybean meal is animal feed. Thus, the price of poultry, pork and beef falls as well. A win for American consumers."
Please explain your logic in making this statement.
2
@ellen1910
Only if you try to do so as a non economist, imho ... ;-)
I have to admit I thought Trump would have a deal now and it certainly seems like this is going to be a prolonged trade war. That said, if we can’t deal with a little pain associated with confronting China now, first, we don’t deserve to be called Americans because Americans are first and foremost the toughest guys on the block, and second, why would anyone think tomorrow is going to be easier given that if anything our economic advantage is slipping. We will see. I still think Trump will get something done if not in his first term then surely by the second.
@Bob
Krugman explains all the reasons why Trump isn't even seriously trying to "get a deal done", as he didn't even define WHAT he wants more precisely.
That means that he's asking his voters to go through pain for NO good reason at all, and ONLY to make them feel as if he's doing something big.
And that, my friend, is called BETRAYING your own voters.
Finally, if Trump can't get ANYTHING done, even not with a GOP Congress, then why don't you act as a patriot and start wondering why, rather than supporting the idea that such a president gets reelected, just to "see whether" maybe he'll start rolling up his sleeves after 4 years of doing nothing ... ?
Any ideas?
26
@Ana Luisa
Perhaps we shouldn’t have a deal with China. It certainly appears that our interests are not altogether aligned, and they are undoubtedly getting richer to a significant extent on account of the US being the major purchaser of their products. If we allow them to get bigger than us I have my doubts as to how nice they will be to us. Maybe we aren’t all that nice either, but that doesn’t mean we let another country take our power without putting up some kind of resistance. That’s just human nature (protecting turf where you can). Not saying I know all the answers; only that no one else does either, including you and Mr. Krugman.
Saying Trump gets nothing done is just silly. You may not like what he gets done, but he’s clearly had a tremendous impact on the US law and policy. Almost impossible to credibly argue otherwise. He’s passed a substantial tax cut, slashed regulations, gotten a deal agreed to in principle with our neighbors and gotten Mexico to agree to help us protect our sovereign borders as is our right (will see what impact this has, but I suspect it will be notable) and he’s, rightly or wrongly, taken on our economic rivals including China.
@Bob
Yes, he passed a massive tax cut - for the wealthiest and biggest corporations. As study after study shows, this has been its impact:
1. The wealthiest 1% got wealthier, so the already big income gap became even bigger
2. Stock holders on Wall Street increased the salaries of the wealthiest CEOs and investors.
3. The deficit has now been doubled, whereas Trump promised to cut it.
There has been NO economical impact whatsoever.
And this is the ONLY major piece of legislation that he and the GOP have passed.
No wall, no immigration reform, no mass deportation of illegals (Trump is deporting/removing LESS of them than Obama already did in 2016). No repeal and replace Obamacare. No infrastructure bill. Also no denuclearization of Iran (on the contrary, it now started building nuclear weapons again) or North Korea.
As to "gotten a deal agreed to in principle with our neighbors": his NAFTA 2.0 has been written and negotiated by the previous administration. AND it was ALREADY "agreed to in principle". To sign it into law, you have to engage in negotiations which Congress, but Trump doesn't now how to negotiate, so nothing happens here either.
Southern border: Obama got a bipartisan bill through the Senate that would have TRIPLED the number of Border Patrol Agents, as experts show is URGENT. Then the GOP blocked a vote on it in the House, and instead, Trump stopped paying them altogether for an entire month, to then obtain an EXTREMELY vague promise from ... Mexico.
9
As Paul Krugman wrote in one of his books, "maybe Trump is the price we have to pay" for our profligate spending. No mainstream politician will think anything wrong with sending $400 billion of our wealth to a mercantilist nation each year (by way of the trade deficit with China) and going into debt to finance it. Unfortunately, Trump's strategy to correct the problem is not well thought out, but at least he recognizes that we have a problem.
2
@RAD61 China is a problem, but not in the way Trump - and perhaps you - perceive it.
The real issue isn't the trade imbalance or the currency debacle, which are concerns to be sure. The glaringly massive issue is the manner in which China is investing throughout the world, most especially the so called developing world in African nations whereby they 'invest' (read loan) a country billions to develop infrastructure which the Chinese Government in effect controls, under onerous penalty upon any kind of default or economic adversity. This provides the Chinese Government with effective economic and political control of these countries and regions, and it's happening world wide.
Where one the US and its allies provided a bulwark against totalitarian regimes, under Trump and Right Wing Governments in the West, Democracy and economic interests are being ceded. And Trump is at the center or it, along with the UK and the rising of the ultra-nationalist right in Europe and elsewhere. Brazil comes to mind.
23
@AMS
I agree completely, and it is the $3 trillion of foreign reserves and $4 trillion of net foreign assets that China has accumulated by blocking imports and running trade surpluses that allows them to make these investments. The consequences of their mercantilist policies are what you say, plus inequality (the people getting rich are those that facilitate the outsourcing of our industry to China and those that have turned us into a nation of shopkeepers selling products made overseas, including tech companies), low-paying jobs for Americans, the hollowing out of our industry and, increasingly, a loss of our ability to innovate.
When you consider the multiplier effect (we lose about $1.7 of growth for every dollar of trade deficit) and China's ability to leverage their equity, the effect is devastating.
The deficit with China is at the root of many of our current problems. I wish some Democrat would address these issues properly, but one hasn't appeared yet.
1
@RAD61
Foreign currency reserves and trade surplus are not directly linked. First one is the money that the government owns. By collecting taxes and not spending all of them on what the country needs and then converting them to a non-local currency. The surplus is not the result of government's activity and not under government's control. It's the activity of consumers and corporates. They just happen to not buy as many American goods as Americans buy theirs (and sure, currency manipulation is part of a reason for it, but it's not like the money that Americans spend in China goes directly into the government's pockets as the FX reserves)
3
China's wealth is in the hands of its government and a few private billionaires. The USA has its wealth equally divided between the government and the people. The trade war would be a stalemate and it has not so far adversely affected either economies to the surprise of pundits like Prof Krugman. All bets are off because no one can correctly predict the long term consequences of the trade war. Anyone who thinks that they can crunch numbers and come up with a most likely scenario could be so wrong that it would make the prediction of economic gloom if Trump were elected look like a reasonable prediction which we all know has yet to happen.
Consumers are the ones affected most by the trade war and if each one of us lives frugally and consumes as little as possible we are likely to benefit the environment and slow climate change. This will make the trade war have little impact on either China or the USA. I heard that there is a benefit to other countries like Vietnam from the trade wars.
2
@Girish Kotwal: China is an exporting powerhouse because its domestic market is so huge that its exports are low cost marginal production. Economy follows scale. You have written that you expect a decline of economic product in both countries from the trade war.
Isn't everything described as "war" unfriendly activity?
1
Mr. Krugman notes that "if lots of money were flooding out of China, the yuan would be plunging, not experiencing the trivial (2 percent) decline that Treasury condemned."
Money would indeed be flooding out of China, and the yuan plunging, were it not for China's Draconian capital controls. It is only the difficulty of taking their money out of China that prevents wealthy Chinese from leaving the country in droves (considerable sums leak out anyway).
The yuan is thus structurally overvalued - propped up by laws that restrict Chinese citizens' free movement while constituting an egregious form of trade protectionism.
Beijing needs foreign currency to purchase Yuan in sufficient quantities to bolster confidence in its inherently unsound currency. It obtains this through its trade surplus with the United States.
Another consequence of repressive government is a lack of innovation. New ideas and inventions involve risk, and few will take great risks when a large part of the eventual rewards would accrue to a regime that not only hinders their movement, but also debases their intellect by stifling free speech. Beijing compensates for this by stealing technology from the West, especially the U.S.
Finally, Beijing uses the wealth thus acquired to threaten the vital interests of the very nations it exploits, as in the South China Sea, etc.
U.S.-China trade is thus a pillar of the Beijing regime's survival, but, on balance, harmful both to the U.S. and to the Chinese people.
13
@John Corey This part of the argument is difficult to understand: "Another consequence of repressive government is a lack of innovation."
China did not turn repressive yesterday. It was repressive even during the days of Deng's "open and reform". Yet, China's economy continues to grow, for three decades now. So what gives?
Maybe it is what Marx said: "the capitalists will even sell you the rope with which to hang them"? After all, China's growth, even in export to the US, was aided by Western, especially US, capitalists even as they demand joint ventures, trade secrets, etc. as a price for buying the rope.
10
@Notmypresident
At the time of the Tiananmen Square massacre, veteran Communist Party leader Wang Zhen said, “As for this fear that foreigners will stop investing, I’m not afraid. Foreign capitalists are out to make money, and they’ll never abandon a big market for the world like China.”
He seems to have been correct.
https://www.nytimes.com/2019/05/30/world/asia/china-tiananmen-crackdown.html?action=click&module=MoreInSection&pgtype=Article®ion=Footer&contentCollection=Asia%20Pacific
If Trump is worried about our trade deficit with China, he should talk to all those Americans who have patronized the Wal-Marts for the cheaper prices over the American manufactured products in what used to be smaller local establishments. Nobody forced those folks to vote with their dollars in the big box stores whose shelves were stocked almost exclusively with cheaper Chinese goods for many years, thereby putting their friends and neighbors in America out of business.
19
@Entera-You've summed up well the reason many lower-income Americans feel they are part of the middle class. Being able to shop at Walmart gives people a sense of well being--they can afford nice things. Forget the hidden costs, those you mention plus footing the bill for Walmart's underpaid workers: medical care, Medicaid, unemployment, etc. Plus reinforcement that we live in a throw-away culture, with more cheap goods polluting the environment and going into the land-fill.
12
As for the supposed arsenal that China can unload on the US, the idea is absolute, total malarky.
Some are worried that China could dump its over 1 trillion in US bonds on the market. It could, and if it does, it doesn't matter at all. In the worst case the Fed can buy every single bond. In the best case it temporarily pushes bond rates up for some lucky buyers. A trillion is not much in relation to how much turns over each year.
Some are worried about rare earth metals. Don't be. We have large stockpiles to get through any crisis. I won't talk about the outcomes, but it won't hurt us much.
Some are worried about recession. Why? There's nothing inherently terrible about a slowing of the economy or even a drop in GDP. The reason economists worry so much about recession is because of the rise in unemployment that usually goes along with it. That won't happen in this case.
The determining factor is how effective each nation's potential retaliations would be in reversing the other's recent retaliations. In this respect, the US is in the drivers seat by a HUGE margin.
The worst effect for the US is that some prices will go up. So too will wages. People will have slightly fewer gadgets and toys, but plenty of food, clothing, shelter and transportation. Food prices will drop a bit. China's communist government will weaken politically.
The biggest danger to the US is that Trump could get reelected. It's time for a true progressive Democratic party to emerge.
7
@DudeNumber42
Most of what happens in economic understanding is the result of smart people ignoring apparently smart statements.
I'm not particularly smart, nor is Krugman, but most people capable of challenging our viewpoints are silent. There are millions. They have just chosen to remain silent for personal reasons.
So why is my voice so prominent? Why could a single person decide so much?
My theory is that I'm living in the universe that catered to me eventually. Others live in universes that catred to them. Which one are we living in? We each live in a universe that makes us the center, and when that vision explodes or implodes, we meet god.
I hope it provides comfort to others that existence is a hologram. That we can escape human pain, to a higher plain, when reality threatens.
1
@DudeNumber42 I agree there is no reason to be worried about the substantive effect of these trade war actions taken by either side - and frankly these actions were never designed to achieve anything substantive anyway. Trump is ONLY playing to his base - showing them he can poke the "enemies" (domestic and foreign) in the eye so that his base "feels good" and continues to believe that he is making America great again
1
@DudeNumber42 but China can stop buying those debt them what
I suspect that China is cautious in its dealings with us because they need to protect their investment in our national debt.
1
People should be voting for party POLICIES and not personalities.
Media should print names of politicians who voted on each piece of particular legislation and how they voted when legislation comes before government to get passed into law. That way voters can make INFORMED decisions when voting on election day.
10
clear and to the point. Thanks
Trump will not win a trade war
because the Chinese are willing to suffer more.
sadly
the underlying sentiment motivating the trade war
is envy of the Chinese.
we could be investing in our people, of course,
to get them to compete more effectively,
but that would be too fundamental a structural change
for this president. not in his range.
But we will outlast him.
Women, voting for a woman president,
will write the next chapter.
take heart.
9
Normally I would be dismayed by bad economic news. But, at this point, anything that degrades Trumps re-election chances is welcome.
30
@Steve S Indeed. I think the music is about to stop and the punch bowl will be taken away.
When will people realize that Trumps lack of knowledge is not just economics, it also includes diplomacy, science, military issues, government, history, sociology, agriculture, etc. etc. in short he’s a universalist.
21
Dr Krugman is on the side of logic and reason as usual, and I would add that not only less than a fifth of China's exports come to America, but also that out of this export from China to the US, a significant portion generates profit mainly for US companies. Just look at how much Apple makes out of an iPhone compared to China's share in it, one can see that curtailing Chinese import would spell doom to many major American companies.
25
It's not just affecting the USA; it's also having a domino effect on other world economies. Don't forget that USA foreign businesses are all around the world and not just in China.
China has too many fingers in too many pyes and internationally, including Hong Kong, they can't be everywhere all the time.
3
Dear Prof. Krugman: please come up with a set of no more than three Powerpoint slides that can be used to make the following points for Trump’s benefit:
(a) when US companies buy goods from China, they have to pay for them (unlike when Trump stiffs his contractors). So money flows out of the US.
(b) China buys far less from the US, which is why they have a trade surplus.
(c) All the beautiful money sloshing about because of increased tariffs actually comes from US companies who import goods from China.
(d) Inevitably, these tariffs will cause prices to rise for US consumers. Just because you wear a MAGA hat, you won’t be miraculously exempted from increasing prices for many products that you buy.
I would come up with the slides myself, but for the fact that NYT doesn’t allow files to be uploaded.
35
Yup, chances of more damaging effects on the American Economy are more than 50%.
We need next quarter results and read on American stats like GDP and Employment. Want to see if Wall Street still wants to keep Dow Jones above of 26K and NASDAQ at 8K+ once those numbers are out (assuming Donald has not folded to Xi Jinping by then).
5
Companies donating to Trump and GOP Congressmen/Senators supporting him would be in trouble if Democratic supporters start boycotting them. Data indicate that Democratic households are (more educated and) richer and spend more. Average income of (solid) Democratic household is ~$65,000, while average (solid) GOP household income is ~$50,000.
Here we need to remember that GOP have many millionaire and billionaire supporters, who increase its own bottom line due to GOP's appeasement of crony capitalism and policies like Trump's tax cut. In reality, the income of vast majority of GOP households or median GOP household income would be much lower than $50,000. GOP always use its money power via rich corporations, millionaires, and various PACs. Now it's time for Dems to play the same game.
Mostly the poor, underdeveloped areas/states are traditionally GOP support base. Despite of huge corporate donations, GOP donors need to sell its products/services to earn a lot to donate that much and a large part of that comes from buyers who are traditionally Dem supporters. And that's why GOP and those Red businesses are not that happy with this disclosure.
13
@bonku--Ditto for boycotting Fox Entertainment News advertisers.
@bonku Boycott the GOP donors
At the same time, China can inflict pain of its own. It can buy its soybeans elsewhere, hurting U.S. farmers."
The great exporters of soybeans are Brazil ($25.9 billions) , the United States ($22 billions), Argentina ($2.82 billions), Paraguay and Canada about two billions each. China imports ($36.6 billions). I suppose that China can import more soybeans from Brazil if Brazil increases its production with terrible consequences for the rainforest. I think that Bolsonaro will look forward to something like this. Any big shift in production will impact negatively the environment. Do you think that Mr. Trump can use this argument?
"As we saw this week, even a mostly symbolic weakening of the yuan can send U.S. stocks plunging." The ironic aspect of this statement is that the person who worries more about a down market is Trump, who has linked the well-being of the economy to a booming market. But, this will have a negligible impact on workers and the middle class. Besides, the market has gone up well too much.
Finally, how would you advise the Democratic candidates in dealing with China on these economic issues? Obviously, we should work with European, Japanese and other to protect intellectual property, and a leveled-plain field in technological production and trade. Something that Mr. Trump cannot do because he is in a economic war against everybody. But, what else would you advise? In a recent column Tom Friedman blamed both Trump and Xi for the current problems.
6
Xi Jinping is president for life. Trump is not (as much as he would like to be). Americans will suffer. China will weather the storm.
China will be the dominant global power in 50-100 years. Good luck to the US, Europe and Russia with whatever they think is going to happen.
China has distinct advantages: population (raw numbers), work ethic, culture ("the nail that sticks up gets hammered down") and (perhaps oddly enough) math (not that the Chinese are inherently better at math, but their language system teaches math/counting far better at an early age).
China is in it for the long haul, with the big picture in mind. America craves instant gratification and is being played the fool.
Good luck, Americans. Our fifteen minutes of tariff fame will soon come to an end ... and our economy may be permanently crippled if we're not careful.
The next election will be a referendum on America and its role in the world. Is it all just about the stock market and unemployment numbers? What are we willing to throw under the bus for those? Sane gun legislation? Mass shootings (including the deaths of children)? Racism? Decent jobs with good benefits? Health care? Infrastructure? Education? International relations? Climate change and the environment? Maybe the last vestiges of our humanity?
We'll find out soon enough.
198
@Blue Moon your opening line frames term limits as a weakness. Sigh. America's institutions will weather the storm.
2
@Blue Moon
I’m skeptical China can thrive under a dictatorship. Eventually the great leader becomes a drag on innovation. Nobody dares offend him. It is unfortunate they turned this way.
1
@Brian
I wonder how much we are willing to give up for the eye candy of an inflated stock market and low unemployment numbers. I very much doubt they will last, especially in light of these tariffs and our soaring debt, both of which could have us primed for a recession.
The tariffs are a fool's errand. China will brace for the pain, while Americans will see increased prices and a probable economic downturn that many are not expecting. All because Trump is an idiot, does not understand fundamental economics and must play to his base for the next election.
We are all in serious trouble.
1
Trump no more has a coherent trade "strategy" than a petulant toddler with a hammer has an architectural vision. Trump just likes to break things and make a lot of noise. Makes him feel strong. Tariffs are his hammer and he is going to keep breaking things until the adults take it away from him.
And responsible adults are all but extinct in this administration. Finding one seems very unlikely. Could have something to do with the job requirements:
"Looking for respected economist to act as a babysitter for petulant President. Position will have no influence on policy. Willingness to publically defend the boss's white nationalism a must. Candidates will be expected to sign an NDA and never admit that the emperor has no clothes. Or a coherent thought. "
So yes, this trade dispute will probably get much worse before it gets better. After all, the next time the oval office has an adult sitting behind the desk will be on January 20, 2021. Maybe.
31
Some comments are that Trump is doing this to short stocks. He's just not that smart. His ENTIRE career has been one of taking hostile positions in negotiations, then threatening the other side with horrible consequences if they refuse "I'll make him an offer he can't refuse!" It frequently doesn't and didn't work, and he lost far more lawsuits than he's admitted (Ask Barbara Corcoran). He also loves stiffing people (Ask El Paso). He also always believes he's the smartest guy in the room and everyone else are fools he can play like pawns.
But he's not smart enough to realize that many world leaders actually understand trade, know what their strengths and weaknesses are, and where they need to give in, merely bend, or not bend. Sun-Tzu was Chinese and no Chinese leader hasn't studied him. Trump, clearly, has not.
I'm not sure Xi's motivations are what Prof. Krugman guesses they are, but that doesn't matter because Xi is playing a gradualist game. Maybe he is trying to educate Trump (a fruitless effort we've seen many times) but I suspect Xi knows it's fruitless. More likely, he's playing three-dimensional chess with a guy who still doesn't understand Tic-Tac-Toe and is slowly maneuvering Trump into a weaker and weaker position while building economic alliances against the USA, isolating us. Sun-Tzu taught patience, to wait for the perfect moment, not rushing it.
Trump doesn't get that, either.
He (and we) have already lost the trade war. He just doesn't know it, yet.
264
@Dadof2-Eh. Some of the ignoramuses that are left in the Trump Admin like Steve Mnuchin and Pompeo think they "know". Also Trump et al are quite capable of picking winners and losers (shorting some stocks in favor of others) so that they and their enablers make money. Criminal minds and grifters at the controls.
11
@Dadof2 Well said. I personally think letting the yuan drop past the 7 benchmark the other day was a shot across Trump's bow, an attempt to let him know that China is playing with a lot more cards than he realizes. But of course, we know Trump never learns. And you're right - we've already lost this trade war; it just remains for the end game to play out.
1
He has been incoherent and incomprehensible from the beginning, but it seems to be getting worse.
17
"I guess arithmetic is just a hoax perpetrated by the deep state."
Oh, Paul, that's your best one in a long time! Yes, arithmetic, climate change, the rule of law, general laws of the physical universe; all these things that Republicans in general and Trump in specific seem unable to grasp. I'm just going to go out on a limb here and guess that Trump failed economics - and everything else he "studied" in school.
10
Paul, Trump doesn’t care about how economics works. Trump is the front man for a group of billionaires whose objective is to dismantle democracy and install themselves as tyrannical overlords. Their strategy is to spread chaos across the country to pave the way for strong-arm tactics that will restore order and put themselves in charge.
So although we can reasonably argue that Trump doesn’t understand economics, that is not his role. His role is to foment and destroy and rouse rabble to tear asunder. He’s a remarkable success.
50
And to "pillage and privatize" government.
3
You'd think a Nobel prize winner would have by now figured out that the so-called trade war has little to do with economics and lots to do with his right to bash his democratically-elected leader and other pleasantries that accompany living in a free country.
.
But because that bashing helps the totalitarian regime in Beijing, you'd also think a Nobel prize winner would have enough sense not to do it.
.
The war with the totalitarians in Beijing is the war of our time. We're going to suffer from waging it. We'd suffer a lot more from not waging it.
.
How about work on that basis and let's see where it takes us?
3
@West Coaster Would you please remind me how Mr. Trump was democratically elected?
2
The likelihood of trump learning economics from China is statistically impossible negative. trump is incapable of learning and we have trouble measuring something less than zero.
9
The US has a right to tax imports.
What war are you trying to stir up? Economists seem to want a war of some kind because they don't like uncertainty.
Economies adjust. You need to start advocating really good new economic ideas. We know the tax cuts were dumb.
In the end, you're not going to help get out the vote because of hatred for the president. That's just going to drive people away from the ballot box.
Informed people probably know why Trump is imposing tariffs. It's political, duh!
I doubt you can undercut decades of pent up frustration over the impovershment of the working class due to haphazard globalization.
1
It appears Trump thinks he can bully international leaders in the same way he bullied business partners in his earlier years. Back then he used lawyers, bad publicity, and the good Trump/bad Trump act to get his way. I suspect he will find that doesn't work in the present context.
12
"His views on trade are incoherent."
One also could say, his views on immigration, healthcare, national security, the environment, international affairs, and domestic terrorism are also incoherent.
"China....they’re still trying to teach Trump some economics"
Well where's Chief Econmic Advisor Larry Kudlow? He's top notch, only problem, he has no background in economics.
And America continues its downward spiral into the abyss.
11
Dr. Krugman, I don’t think that China is trying to “educate” Donald Trump. That’s impossible; no one and nothing has been able scale that very small hill. Don't we see ample evidence of his stunning incompetence on a daily—if not hourly—basis?
I suspect that Xi, who, of course, is not up for re-election next year, knows that he can wait out the foolish schoolboy president. Trump’s not some formidable intellect that keeps the Chinese up at night. With American farmers being forced to see their lucrative soybean markets sail away to Australia, the Chinese know full-well that the president cannot make their catastrophic financial losses seem negligible. What Democrat won’t make that a point next year?
I’m no economist but it’s also clear that the president has surrounded himself with economic advisers of the third and fourth drawer. This administration is playing right into Xi’s hands. He’s got plenty of time and no pressure. Trump has less time and mounting pressure, and we know he doesn’t handle that well.
12
Trump cares only about getting reelected. He does not care about long-term economic consequences for America or the rest of the world. The economy needs to hold up only until the next election.
If the tariffs cause the economy to seriously go south, Trump will bid a hasty retreat. He will cut and run.
Trump has nothing to run on other than the stock market, unemployment numbers and racism. He is focused one-dimensionally on those things. Let's not kid ourselves otherwise.
10
Three cheers for Republican ignorance !
Is there anything Republicans understand beside greed, power, violence and blaming others for everything ?
All economies functions on consumer demand and Keynesian economics.
If consumers have weak wages, then kiss demand and the economy goodbye.
Government spending (demand) also stimulates the economy.
Republicans hate it when workers are paid too much or the government spends money (unless it's for war or farmer welfare).
Oligarchic economies are weak economies, like Russia's.
But oligarchy is what Republicans prefer....give all the money to the rich and bankrupt the national treasury in the process, let the economy overheat, bubble and collapse...and then blame it on the Democrats and let them clean up the Republican mess.
Trump's business 'skills' were acquiring debt, shirking debt, shirking investors, evading taxes, losing with house money, and filing for bankruptcy repeatedly.
Trump's economic mastery is limited to that of a pickpocket and a financial deadbeat.
586
@Socrates
"Republicans hate it when workers are paid too much..."
Correction: Republicans hate it when workers are paid at all. They'd much prefer that we pay the "job creators" for the privilege of working. This would be in addition to subsidizing the taxes of said "job creators," of course. I'm not sure where they think we'll get the money for that but critical thinking doesn't seem to be their strong suit so the impossibility of such a concept doesn't seem to be hampering their efforts at all.
35
@Socrates
Which makes him the perfect leader of the Republican Party!
22
@Socrates yes... there is one thing Republicans understand even more than greed etc. Hypocrisy.
27
Every country that deals with Trump has to decide whether to punish his immediate idiocy or play a longer game based on the prospect that he is deposed after a single term and some return to sanity may be possible.
China so far has been playing the long game, but the risk there is that this strategy can create the illusion that Trump’s policy is working. That could make Trump stronger politically. The likelihood is thus that China lets Trump coast until a few weeks before the election, then hits him with a devastating crisis, thus assuring the electoral loss.
8
@woofer
If they actually ARE playing a long game with the goal of diminishing the influence of the United States, then they might actually be interested in helping him get re-elected.
In that case, they might actually ease the pressure right in time before the election...
1
Do Trump and his hicconomics advisors listen, let alobe understand? I doubt. Can they be sued for hicconomic malpractice as is common in medical malpractice?
1
Why haven’t the Chinese gone all out?
My guess is the message they are sending is to other Americans about what could be and hoping the "adults" will either rein Trump in or vote him out. My prediction is China will take measured steps, or steps that specifically target Trump supporters, until after the election. If Trump wins reelection, then we'll see the gloves come off, on both sides and Trump will end up crashing the world economy like Bush. It is practically a Republican tradition. Remember the Trump supporters are the same people who reelected Bush. Afterwards, they'll be as against Trump as they were against Bush in 2016. It takes then about 10 years to realize what suckers they were.
I wonder how much China will work to influence the election? McConnell is dragging his feet on election security because he knows Trump's good friend Putin will be meddling to support Trump and Republicans will benefit. The moment he realizes China is meddling to get rid of Trump and stop the tariffs, McConnell will suddenly be all about election security.
7
@DB-Please note. The Republican voting base numbers are not sufficient for Trump to "win" without vote suppression and gerrymandering and electronic fraud. This worked in 2016 and is why McConnell is standing in the way of securing our election system. Your own state is Exhibit A.
2
China did give just a marginal lesson to Trump...capable of so much more. The stable genius is non educable and determined to play the wrong game here. He systematically overestimates his own competence and underestimates what he needs to learn. Which is tragic, and so very very dangerous.
2
Trump watching is not my favorite hobby. I find it upsetting to hear his latest tweets or insulting remarks. However, I do find it illuminating to watch the reaction of other nations to him. I think, based upon what I've seen, that the Chinese and the North Koreans, and yes, Putin, have his number down better than anyone else in the world. Trump is a spoiled child and loves to be adored. What he doesn't love is reality. And that is a problem for the rest of us because we will have to live with the reality he creates with his tariffs, his bullying remarks, his insults to our allies, and the racism and bigotry and intolerance he's encouraging here and abroad.
Trump needs to rest his twitchy Twitter fingers and concentrate on being a real leader. He needs to stop trying to control the narrative to make himself look like he's being wronged or that he's great. If he were doing his job that would be great enough. For someone who campaigned on making America great again he's failing and he's failing "bigly". He has no comprehension, or interest in acquiring the comprehension, of what our lives are like. He selects incompetent nominees and frustrates competent people.
Trump is a poor president and even poorer human being. He and McConnell and the rest of them deserve each other. We do not deserve Trump or McConnell. We deserve people who can govern with competence. And the Chinese will stop trying to teach him and let him sink.
8/8/2019 9:34pm
7
"So this trade dispute will probably get much worse before it gets better."
Hopefully, before the next election.
Xi Jinping may be in a better position to pick the next American president than even Vladimir Putin.
3
Finally. A column by Dr. Krugman recognizing that Trump's views on trade are "incoherent" and his demands "incomprehensible". Until recently, many commenters here talked of Trump's "trade policy" as if he were a decent, sane, intelligent man. He is none of these things. And Dr. Krugman is right. Trump doesn't understand the ramifications of his "trade policy".
Nor does Trump care that millions of Americans will suffer under his ill-conceived "trade wars". He is pursuing his reckless "trade war" because his base loves to see him stick it to non-whites, be they Chinese, Mexican, or anyone else. Now, Trump's voters themselves will suffer most, but they really don't care. It is all about the theater of a white strongman imposing his will.
Put simply, Trump voters don't care that his trade policies cost their households additional thousands of dollars a year - all the while putting things like affordable healthcare out of their reach. Trump voters could have their pension funds decimated from his reckless actions, and they won't care. Because their sole interest is race.
As long as Trump tells them that as whites, they are the only "real" Americans, and gives them license to mistreat their brown skinned neighbors, they will stand in soup lines for this man. They love Trump's idiotic "trade policies" just as they love seeing Hispanic children in his internment camps.
Trump voters finally have a president as bigoted as they are. And this is the only "trade policy" they want.
9
Well Mr. Krugman, apparently you did not read that economic tour de force, The Art Of The Deal. Or, you just skimmed through it without absorbing the subtle machinations of Donald Trump’s truly magnificent mind. One could say he’s a genius. I expect that you will be singing a different tune when the USA, under Donald J Trump, brings China to its knees.
If you hurry, you can still buy a used copy of that literary masterpiece from Barnes and Noble for $1.99.
Good luck with your studies Mr. Krugman.
1
In summary, China has (1) enormous market power, (2) multiple options and sources for nearly every product that it buys from the US, (3) control of several rare metals that are crucial to our emerging technology sector, (4) lots of cash to invest in its own research and development, and (5) lots of cash to lend directly or indirectly to the US to gain even more leverage over our economy and currency value. But we have...soybeans. Yeah, soybeans.
4
Dr. K,
What I sense is China is holding to its long-term economic development strategy and this Trump bump in the road causes a lot more pain in the U.S. than it does for China.
The U.S. does not seem to have a long-term strategy and our trade actions do not appear to enhance our economic future.
Clearly, we are squandering our preeminent comparative advantage in agriculture. We enjoy very large areas of arable land, a temperate climate, plenty of water, and very efficient low-cost waterway and rail logistics. We have advanced packaging and a huge refrigerated food processing and shipping and plenty of deep draft shipping ports. Importantly, we have the energy and electricity distribution system to support these industries.
The UN and several other food studies are forecasting food shortages for the World and China and its bordering neighbors are especially vulnerable and because of their history their population is particularly sensitive to their food supply.
So it seems to me that China, pop. 1.3 Billion, could be a good trading partner. They have plenty of labor and the last time I looked they were investing in the education of their young people.
Now, the current Trump theatre of absurd tweets, unilateral imposition of tariffs on China's exports as trumped up punishment for their economic success. Sadly, the Trump policies could destroy the means for achieving a cooperative effort to reduce the threat of global warming and slow world economic growth.
12
Except for stuff I have to have, like food and toilet paper, I've quit buying things. Everything is more expensive, even in stores like Walmart. I have enough clothes and knickknacks. I don't need more, especially since they're expensive because of the tariffs. Retail sales drive America's economy. If people quit buying, the economy will tank. If prices keep going up, people will quit buying. Trump will find himself in a vicious cycle.
20
"Why haven’t the Chinese gone all out? It looks to me as if they’re still trying to teach Trump some economics."
I think the Chinese are smart enough to know that one cannot teach a new trick to those who are not prepared to learn anything. So, one should conclude that the Chinese, instead of "trying to teach Trump some economics" may be they don't think it would be prudent to take drastic steps at this time. In other words, they could be simply waiting for the right time.
If they "go all out" now, Mr. Trump will have 15 months to try to retaliate and hurt them economically. Given his vengeful, impulsive, nature, they cannot exclude the possibility that he could even try to engage China militarily.
The Chinese may have figured that the right time to "go all out" is probably sometime in October 2020. Actions by China at that time - which is too close to the November election - will tie Mr. Trump's hands. Any extreme action on his side will be seen as an attempt to influence the election, which would further reduce his re-election chances.
32
@Eddie B.
I agree. China is not a Trump fan, Russia seems to be a very big fan. North Korea not so much.
All have been implicated in hacking and tampering to some extent or even more. Perhaps China can find all those Kushner, Trump, Russia communications. If your listening China, Hint, wink.
Timing is the main thing. Impeachment at the just right time, China interference at the just right time for voters.
When you start taking hits from all sides even a stable genius can have problems dealing.
Timing, economy failing, voters learning shameful facts, friendly Republicans changing sides.
Truth to Power, and just before the voters cast there votes.
Timing.
4
@Eddie B.
China goes all out in October 2020? Please, God (I want to give Her one more shot with Trump).
@Eddie B.
If China goes all out in October 2020 or even September, such that Trump's re-election attempt will fail, he'll invent some reason for declaring war, hoping that will save him. The war might be with NoKo, or Iran, or invading Venezuela, or ... and this is truly scary ... maybe even China itself (saving HongKong? saving Quemoy and Matsu? impeding the nuclearization of the South China Sea?)
From my unscientific, non-economist view of things, I watch the cargo ships come and go in Elliott Bay. They come in full, as usual. But they seem to be leaving even less full than a year ago.
Less recycling going to China? Yes, but also much less of other stuff. So much for winning trade wars.
12
Trump flunked Macro Economics 101, or someone took the tests for him, or he never took the course.
There is no way this guy could explain balance of trade or the dynamics that drive relative currency valuations.
I really feel for the business owners, farmers, supply chain and logistics people, etc. who are trying to function while there is a hot loose cannon on a rolling deck.
And he calls himself a businessman.
20
@Pono I feel sorry for them if they voted for him.
You may be overthinking this Dr. Krugman.
The assumption that Trump has some kind of goal in mind with China on trade is giving him too much credit. Consider the trade war with China just one more example of Trump posturing for his base, as with the wall. If his China policy makes no sense and is contradictory, well none of that bothers his base on anything else he does. He gets to make noise and be cheered, so it's winning. That's all that matters.
Trump is running the country like a reality TV show where everything is contrived for maximum drama. It's time to cancel this turkey, and don't bother with the Mike Pence "On Your Knees America" replacement series waiting in the wings.
137
@Larry Roth
re: Mike Pence, been spending more time on my knees lately. Mmmm, fun.
@Larry Roth
I agree with your view on Trump's "RealityTV mentality. Trump may not have well considered long term goals, but his actions are generally ones that give him immediate political gain, more power, and more attention. A Trade war gives Trump lots of opportunities to reward is friends and punish his domestic opponents.
But the big picture is that Trumps actions go towards
creating supply chains outside of China, and increasing
the competition worldwide to supply stuff to the US.
Simply the Chinese know is goal is simply to mess them up.
Given "global boiling" will son be destroying agriculture world wide, leaving American farms fallow for a few years is not terrible (except for the farmers). Farms are not factories and we are facing a Malthusian period where who has water and food becomes the most important issue. Factory made products will see the most competition, and price pressure from globalism, because the don't have the transport issues food and water have.
1
"At the same time, China can inflict pain of its own. It can buy its soybeans elsewhere, hurting U.S. farmers. As we saw this week, even a mostly symbolic weakening of the yuan can send U.S. stocks plunging"
The author doesn't seem to understand that the market is global now. China's not going to stop using soy beans or other agricultural products. If they buy them from Brazil instead of us then we'll just sell to Brazil's old customers. It will take some time to restructure our supply chain but it can be done and is being done. Also, take a comparison look between the DOW and Shanghai Composite over the last 3-4 years. The DOW is much stronger. Any retaliatory measures China takes that makes the DOW drop will crush their market and they know it.
They're not taking it easy on us because they're trying to teach Trump a lesson. They're taking it easy on us because it's their only option. Take us down one notch and they will drop two or three.
6
@Adev Right, PK doesn't understand global economics. Thanks so much for that insight.
12
Chinese can and are playing that game too. The Chinese manufacturers are simply shifting their manufacturing to Vietnam, SE Asia and then it comes to America tariff free.
6
@Adev
Got a friend in dairy. They're hurting bad. China was a big customer.
Still she's a FOX watcher and even though she doesn't like Trump, she'll continue to support him.
1
China is the empire of stability, the middle kingdom. I don't think they're trying to "teach" Trump anything, I think they're trying to hurt our farmers and back up a bit so as to maintain the financial stability that they want too. As far as the possibility of global contagion of trade wars, it's a real possibility. You mentioned that instability is affecting business investment. But I'd wager the precarious situation of the working and middle class will buckle everything. Over extended credit it at $142 trillion.
Trump has been wrong on almost everything, except for his dealings with China. China has been measured in its response because there isn't a lot it can do. It's already stopped buying US agricultural products and there isn't much it imports from the US. If it devalues the Yuan too much, it risks currency flight (that has happened before) and increased debt burden as much Chinese corporate debt is denominated in dollars.
If China tries to irritate Trump more, Trump can do a lot more damage to the Chinese economy by ratcheting up tariffs from 10% to 25% on the $300 billion of goods just announced or even higher tariffs already in force on other goods.
We need to stay the course with China, and there is no need to "rush" to settle this issue. Supply lines are already adjusting to outside of China, to countries more aligned with the US. For example, foreign investment in Vietnam is up 70% this year compared to last, with half of this in manufacturing. The longer this goes on, the more it's going to hurt China. Any pain to US consumers will be small and temporary.
11
@RBSF OK farmers, put on the rose colored glasses , it'll only take a season or two or three to sort this out. Your lenders will understand.
Or maybe short used farm equipment dealers.
16
@fbn The hit to farmers is small, and minuscule in relation to US economy. You can find monthly export data at the USDA website https://www.ers.usda.gov/data-products/foreign-agricultural-trade-of-the-united-states-fatus/us-agricultural-trade-data-update/#Latest%20U.S.%20Agricultural%20Trade
We are exporting about $10 billion less per year compared to a year ago, but almost the same as we were in 2017 and before. Agricultural exports are also less than 5% of the total production, so the US ag. production is not geared largely toward export.
Furthermore, the US economy is about $22 trillion. The loss in agricultural exports are less than 0.05% of the US GDP; we can easily afford to pay farmers $10 billion a year for their lost income rather than risk selling our IP and soul to China. And what you think of as "farmers" are actually very large corporations doing production.
4
@RBSF Have you considered that China, too, will adjust to trade without the US?
2
“The Fed can cut rates, but not very much given how low they are already.” And Trump wants rates lower, without understanding why.
The other tool would be tax cuts, but we’ve already got a $1T deficit that is budgeted to grow even more.
8
@SXM The Fed can cut rates, but not very much given how low they are already. Actually another tool would be a tax raise on the highest incomes to fund a stimulus for domestic small business and infrastructure.
2
China is not going to kow-tow to a one-term (?) trade bully. They are playing the long game with most of the cards.
In the meantime, the US loses any ability to negotiate on behalf of the people of Hong Kong, focus on keeping the South China Sea open, etc.
The bad news is the damage is deep, but the good news is may only be short-term, and the Chinese will wait. Unlike the Russians, they don't have any particular fondness for this president.
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@Michael
The Russians don't like Donald Trump either. They just bought him so he could sow chaos in the United States.
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GE went to China thinking it could take advantage of the cheap labor. GE taught China how to make turbines and the Chinese put the GE turbine division almost out of business. In that case we gave them the technology.
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@Citizenz Yup, and it happened all the time. Part of the deal with having manufacturing in China was that American companies gave the Chinese, GAVE the Chinese GE's intellectual property: designs, manufacturing techniques, etc. Did American business HAVE to do this? Well, maybe, if they wanted to do business with China, which was just too tempting for short-term profit focused American companies. So, they gave away the store, lock, stock and barrel. And, yeah, the Chinese spy, just like the rest of us. But, it's hardly a surprise that that the Chinese are eating a lot of American industries' lunch, 'cuz these industries gave the Chinese the recipes, told 'em how to make the meat, cheese, what kind of veggies to consider using, and the recipe for making and baking the bread. So, boo, hoo... Who got hoist on whose petard, after all?!
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@Citizenz Totally correct! And Prof. Krugman would like other companies to follow in the steps of GE.
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China was the largest economy two hundred years ago. Guess what brought them down? Our free land and free labor wiped out the Chinese economy. That’s how competitive advantage works. If you have one you don’t throw it away. China(and India) will continue to leverage their market access. Its our choice whether to get access to one third of world market or just be content with just our market.
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China steals intellectual property and uses it to make cheaper goods that undercut American companies. China subsidizes state-owned manufacturers that undercut American companies. China may use state-owned technology to spy on American governmental and corporate servers, and potentially sabotage them.
Previous Presidents have bought into Wall Street's line that we can't do anything about it -- too risky! We have to let them steal our IP, subsidize their corporations, and spy on us so that we can continue to use their cheap labor (again, undercutting American companies).
So, Trump did what I think is the right thing. And the resulting disasters? Haven't happened. Stocks barely hiccuped. (Not that they aren't massively overvalued by the liquidity sloshing around the world, thanks to central banks.) Farmers? Finding other markets for their soy beans. Massive inflation due to the burden imposed on consumers? The Fed still can't get inflation to 2%. In short, not a dent in the economy.
While Professor Krugman often (and rightly) points out the lack of objectivity shown by right-wing economists, in this case I think he is suffering his own bias and lack of objectivity as a left-wing economist. The dismal science, indeed, when even the best economists are wrong due to their politics.
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@Unconventional Liberal agreed on a few points, but I don't think life for U.S. soybean farmers is going to be so easy.
Also be careful in that you could make similar arguments about the relative lack of impact to China's economy by all of this. Both economies are growing modestly at the moment, and in both cases they're growing by massive accumulation of debt.
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@Unconventional Liberal"
On the other hand laymen are never wrong according to their politics.
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@Unconventional Liberal - Trump always gets credit for doing "something". Unfortunately, he usually fails. He should never have bailed on the TPP and should not have alienated the rest of the world. Now, he will go it alone and he will fail again. Like he failed to end the ACA, like he failed his negotiations with North Korea, failed comically with the ME peace plan, failed to get Mexico to pay for the wall, and his inhumane treatment along the border has failed to end the crisis. He's simply a failure.
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There's nobody except Warren and Sanders that are making any sense about economic policies that can help the working class in this country.
Absolutely nobody!
Krugman has been willfully blind to the effects of unfettered globalized capitalism for decades. I know he knows the mechanisms in play. I know he can reason out the same thing I stated, that given the situation, GDP and employment rates are decoupled from normal macroeconomic expectations.
Krugman is trying to exhert his will over democracy. If there's no room in economic policy for democracy, then then there's no room anywhere for democracy.
This situation was decades in the making.
Let's hear the new ideas.
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@DudeNumber42 A 33% tariff on all Chinese products coupled with strict quotas. Let's see what happens to all the promises the Communist Party made to its subjects. While we are at it lets recognize a free Taiwan and Tibet.
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Trump is a showman. He loves the show. He is perfectly happy to say he won at the end of every episode. The actual outcome does not matter to him, or to his believers.
If pressured to stop, he will just say "I won!"
In the end our growth will have been cut from 3% to 2%, and China's from 6% to 4%.
Their innovation will continue to outpace ours because they are promoting AI, solar panels, and electric vehicles while we are promoting real estate development/gentrification, coal/gas fracking, and internal combustion engines.
If current trends continue, our middle class and China's will both be earning about $10 an hour in 30 years.
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@priceofcivilization Agreed. I believe in you guys, though. America has been able to completely refashion itself in the past, just like Madonna at her peak.
I don't see that the current trends are baked in to continue indefinitely.
Start by voting D in the next election.
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@priceofcivilization
China also continues to invest in education - something that China has always valued despite being a communist nation.
America has put public education at the bottom of our investments. Add to that the religious right that continues to push for parochial education - vouchers, home schooling, violations of the separation of church and state. Forget about science among the religious right.
Higher ed is way too expensive for the average American family. And investment in research and development is at its nadir, both public and private.
China will never allow religion to affect its secular education and scientific and advanced technology development. America's takeover by evangelical Christians and orthodox Catholics will severely hamper and limit America's future.
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"to understand the developing trade war with China, the first thing you need to realize is that nothing Donald Trump is doing makes sense"
It makes perfect sense as decoupling the economies, to enable the two nations to fight.
Those at the top of the Trump Admin (other than him) often use the word "decouple." They've been saying it for awhile now.
Don't ask how we can repair this trade relationship. Ask how we can prepare ourselves economically to fight with China. Then it makes sense.
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@Mark Thomason
You overestimate the severity of the situation. It's pure bluster.
@DudeNumber42 -- I hope you are right. However, I distrust "It isn't as bad as it seems, don't worry about it."
I favor more the idea that when someone tells you they mean you ill, believe them the first time. By that I mean talk of decoupling.
to me PK's conclusions are obvious -- the next obvious question is: why isn't the mainstream media asking about the same things?
Is PK so "untouchable" that obvious is not a serious journalistic topic?
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The business Trump probably should trust his business instinct. However, the business he is dealing with now, compare to his familiar ones, sadly is not at the same scale. So, American people's interests are holding in a gambler's hand, who trust no science and statistics. This political experimental cost will finally be unveiled, and could be catastrophic.
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If Trump starts running the country like he ran his various scams (I hesitate to dignify anything he’s done by calling it a business), we’re really in trouble. Unlike Trump’s “businesses”, the US won’t have the luxury of going bankrupt six times and getting bailed out by the Russians.
Although, if Trump could sell the USA to Vladimir Putin, I’m sure he would
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Trump's trade strategy is driven by a nothing more than a general anti-China animus. Sadly, this has become bipartisan as there is no political downside to being anti-China at this stage. This is the new Red Scare and I can't see anything other than a long simmering rivalry with an unnecessary enemy.
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Dr K
Please explain what options a rotating US president has that can work effectively and expeditiously without use of transnational coalitions?
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@Djt
Obama negotiated the TPP. But it took 8 years, and Trump refused to sign it.
It would have helped the US and global trade.
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Professor and Nobel laureate.
@Fourteen14 Thanks for repeating that. People's memories are awful short these days.
In their long-term calculations of national power, wouldn't the Chinese reason that a short-term trade war victory doesn't hold a candle to keeping Trump in power another four years?
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@Michael I don't think China is thinking zero-sum. If their main game is growth of CCP economy and influence, then removing the hostile and unpredictable Trump is better than another 4 years.
Trade wars mean everybody loses. Even the current 'skirmish' is stunting growth both sides of the Pacific.
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a recent comment by a senior chinese advisor was that they didn't need to retaliate too much directly against Trump's latest moves because the new tariffs themselves would damage the US.
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@Smokey geo Trump never did get around to applying tariffs to Russian products. No mistake, Trump owes a lot to his masters.
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You might hear the recent disputes between Japan and South Korea. Japanese government wants to inflict some damage to semiconductor industry of South Korea by controlling export of key chemical materials. It's kind of retaliation against Korean government which does nothing to a bad decision against Japanese companies in the Korean supreme court about reparation for forced labor of Korean people by those companies during the World War II. Even though South Korea has strong semiconductor companies like Samsung, they are largely dependent on Japanese chemical companies. So, South Koreans are very much frustrated.
Similarly, the crown jewels of the Chinese people mostly depend on many of the US companies.
Chinese government does not want to restrain the modernization of their industries by imposing strict rules for IP protection and removal of enforced technology transfer from the foreign companies which want to do business in China. All the developed countries as well as the US cannot allow this outrageous policies any more and the US government can threaten some of those star companies in Chinese industries, like Huawei and others by not exporting key building blocks of their products. There will be no objection from other developed nations and some of them will participate with the US very willingly if the US government's position is firm.
Trump has far more good cards than Xi and that's the reason why Chinese government is very cautious in retaliation against the US.
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@Young
China is able to look at the longer term and isn't hindered by a president with the attention span of a goldfish. The blocking of technology sales to China will help them become more self-reliant. As they say, necessity is the mother of invention and China has the zeal, resources and intelligence to catch up and perhaps overtake.
You forget that Trump's trade policies are not only affecting China but most other countries as well. So, I'm not sure that other countries will willingly participate in America's pointless trade wars. Australia, for example, has no trade related issues with China, but America's trade policies will greatly damage Australia's mutually beneficial trade relationship with China and dramatically affect Australia's economy. I'm sure that the same is true for many other countries.
I'm far more inclined to agree with Krugman's explanation for China's restraint than yours. After all, Krugman has fact, logic and economic understanding on his side.
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But, Dr. K., you assume he acts for anyone other than himself. But we all realize by now that as long as he wins, makes money, or is at the center of things, he sees himself as winning (and so wins).
He believes that whereas we see his 'unpredictability' and irrationality as inherently dangerous and counterproductive, competitors see an unknown and so will be loathe to challenge it.
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Here is a real-world case: I work in the professional audio-visual industry. Yesterday I was with a customer who buys LED panels manufactured in China. I asked him if he was experiencing any effects from Trump’s trade war.
He told me that his most recent order was placed before the latest round of tariffs, but that his supplier was willing to price-protect him. Another supplier tried to get his business but was unwilling, at first, to match prices. Then the first supplier agreed to ship the order FOB destination, which meant it would be their responsibility to get the shipment through customs. When the second supplier heard that, they offered to do the same but my customer had already placed his order with the first supplier.
My customer expressed the thought that he couldn’t say how long the Chinese would be willing to take it in the shorts to keep selling product to the US, but the US is by far the largest user of LED technology so they may endure quite a bit of pain to keep the production lines moving.
For American consumers and American farmers, the pain is going to be unavoidable and intense. This is a tax increase, plain and simple, and needs to be regarded as such.
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@Joseph Mancini
Consumers will simply walk away from price shock.
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@Mathias
That's very simplistic. It depends on factors such as the need for the product, alternative sources, substitutes, level of price rises, etc.
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@Mathias
And since consumer spending is a big driver of the economy, there goes the "strong" economy.
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I have a question for the professor, or anyone who can answer: what would happen if China started selling off the American debt it owns? My view is unschooled, but my expectation is this:
1) China cashes in until the world notices, and then the value of the debt will fall. 2) China holds for a while until the value recovers and then starts selling more, basically proving that anyone else that buy American debt will soon lose money because China can force its value down, 3) America will be unable to finance its national debt until 4) it agrees to remove the tariffs and 5) China repurchases the debt at the new low price and emerges with an even greater share of the total.
Is this plausible ?
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@Gerard
Three questions: To whom will China sell the debt? Who can buy it? Who wants to buy it?
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@Thomas Zaslavsky Given that the US debt would be backed by the "full faith and credit" of the Federal Government, would not discounted debt be attractive to others? IF that is so, would the Federal Reserve step in to buy the debt and thus prop up the value of that debt? IF that is so, would this not be inflationary as money to purchase would have to be printed by the Treasury? Would this be inflationary? Could this cause a recession?
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@Thomas Zaslavsky The Saudis occur to me as do buyers as of other oil-rich countries Arab countries, etc. Perhaps wealthy Russkis?
The President does not need to listen or learn, because the ''end game'' is for him and his backers to personally enrich themselves at the expense of Americans.
Every time there is a column on fiscal policy of this administration, I come along and say/ask the same thing.
Who in this administration are benefiting from shorting stocks within whole sectors (some have already been caught doing so and got slaps on the wrist ) ? Where are the pundits going into detail of the above ?
Guess I have to wait for the next column.
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@FunkyIrishman
Does it occur to Krugman that he could be wrong? That he can't see past his absolute disdain for Trump?
As it is, he is notorious for starting with the conclusion and then fitting data/ narrative to it.
Opposite of a what one would call critical thinker....
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@MS
It didn’t occur to me that PK could be wrong, his argument seems to make perfectly good sense. As for having a low opinion of Trump, it’s had to avoid this if you are a critical thinker.
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@MS. The Nobel Committee for Economics would disagree with you. He hasn't been wrong yet. If he were a stock, I wouldn't short him.
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China is being measured in its response because it wants to show Trump who is boss without damaging his chances of re-election. Trump with a little more fear is the China dream come true.
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@Ernie Cohen Depressing, but most likely true. All of our genuine enemies are very happy about the Trump presidency, because he is doing more damage to the US and its reputation than they ever could.
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@Ernie Cohen I don't know. The Chinese were doing great with more stability in world affairs. I'm sure they can capitalize on instability, but it may not be preferred. They will just wait out this administration, whether four or eight years.
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@Ernie Cohen
I agree with you that China would benefit long term from the re-election of Trump. After all, Trump's conceited ignorance & his infinite greed are his sole characteristics. Trump is otherwise an empty suit. He is therefore more easily manipulated than he will ever comprehend and far more dangerous to the USA itself than to China.
Trump is permanently poisoning the credibility & negotiating power of the USA and China, like Russia, would no doubt love to see the USA continue its Trump-accelerated decline into third-world status.
I predict that both Russia and China will be actively hacking the 2020 election with the goal of getting Trump re-elected.
1
Yes, Dr. K., and the still unasked question is:
"Who thinks China will happily turn on a dime and blithely restore the Chinese market streams which the U.S. used to sell into, as soon as this Republican President is out of office?"
Anticipating the date, should we be studying Roman history following the reign of Nero, or the period after Caligula's departure ?
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@R. Law
How about the Century of 30 Emperors, which Rome miraculously survived, but diminished?
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@R. Law
"Anticipating the date, should we be studying Roman history following the reign of Nero, or the period after Caligula's departure ?"
One should always study Roman history in any case. :)
But to your point, the Roman bureaucracy was able to survive two horrendously bad emperors thanks to the self sustaining system Augustus devised. It also helped that the two monsters were replaced by relatively efficient and pragmatic emperors.
But to your point, can we survive our own incompetent leader? (Trump is many things, but he is not a monster.) Answer: Stay tuned.
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@Thomas - A veritable buffet of negative outcomes to study, right?
2