There Was No Housing Bubble and Everyone Agrees We Have to Crack Down On China's Practices on Intellectual Property — Dean Baker

Okay, at the risk of not getting included in the happy consensus, I will make a few points here.

My thoughts exactly. Tackling China is just plain crazy, especially when the US was benefitting in real terms of trade and China was still willing to save in USD. Those days are nearly over for the US and hopefully the newly rising China will overlook a century or so of humiliation, including the latest episode.

As Dean Baker points out, intellectual property has become a bug rather than a feature, and technology sharing is a a good idea for everyone — in a sane world.

Moreover, practically speaking, the Chinese economy is already larger the US figured on the basis of PPP, which is what counts economically rather than the absolute size of nominal GDP without deconstruction, as Dean Baker also observes. 

For example, the US spends a huge amount on military and FIRE accounts for a sizable portion of GDP, while R&D and infrastructure lag. Conversely, China is hugely investing in infrastructure and R&D, gets more bang for the buck in military spending, and doesn't have an outsized FIRE sector in comparison with the US.

Beat the Press
There Was No Housing Bubble and Everyone Agrees We Have to Crack Down On China's Practices on Intellectual Property

Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, D.C

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My view is that far from "winning" this round, DJT blinked. With the election coming he decided to postpone the real negotiation until after the election, on the assumption he will win owing to a good economy.

Angry Bear
The US-China Nothing Burger Trade Deal
J. Barkley Rosser | Professor of Economics and Business Administration James Madison University

Econbrowser
The “Deal”: Much Ado about Nothing
Menzie Chinn

Trade Policy — Uncertainty May Affect the Organization of Firms’ Supply Chains— Sebastian Heise, Justin R. Pierce, Georg Schaur, and Peter K. Schott

Global trade policy uncertainty has increased significantly, largely because of a changing tariff regime between the United States and China. In this blog post, we argue that trade policy can have a significant effect on firms’ organization of supply chains. When the probability of a trade war rises, firms become less likely to form long-term, just-in-time relationships with foreign suppliers, which may lead to higher costs and welfare losses for consumers. Our research shows that even in the absence of actual tariff changes, an increased likelihood of a trade war can significantly distort U.S. imports. 

In a recent study, we examine how firms set up and operate their international supply chains, building on a theory of “optimal procurement” previously applied to firms’ domestic operations. In our framework, a U.S. firm chooses between two systems to import inputs at the lowest overall cost, while ensuring that suppliers provide high-quality inputs. Under the “inspection” system, the U.S. firm buys imported inputs from the lowest-priced foreign supplier, and then incurs additional costs to inspect each shipment for quality. Under the “relationship” system, a firm enters into a long-term relationship with a foreign supplier and, instead of inspections, incentivizes the supplier to provide high-quality inputs by paying a premium over the supplier’s costs. The foreign supplier values the relationship because of this premium. The U.S. sourcing firm prefers the relationship system if the premium it pays to incentivize the supplier is less than the inspection cost. 

The choice between these two systems depends on the cost of inspections relative to the premium paid to suppliers in a long-term relationship. This comparison highlights channels through which trade policy uncertainty can affect a firm’s supply chain decisions.
Consider the case of a foreign firm supplying inputs to a U.S. firm under the terms of an established relationship. If trade policy is certain, the foreign supplier believes the relationship can be long-lasting, and requires only a small premium over its costs to continue to supply high-quality inputs. If trade policy becomes uncertain, however, so that a trade war may end the relationship in the near future, the foreign supplier will require a higher premium to provide high-quality inputs. In this case, the U.S. firm may not engage in long-term relationships with its suppliers—forgoing the benefits associated with the relationship system—and instead opt for procuring goods via the inspection system.
Applying this framework to detailed, transaction-level U.S. import data, we are able to able to examine the implications of a past shock to U.S. trade policy uncertainty for U.S. firms’ sourcing decisions....

Liberty Street Economics — FRBNY
Trade Policy Uncertainty May Affect the Organization of Firms’ Supply Chains

Sebastian Heise, Justin R. Pierce, Georg Schaur, and Peter K. Schott

Germany Stalls and Europe Craters — Alastair Crooke

But if Germany’s manufacturing woes were not sufficient in and of themselves, then combined with the threat of trade war with Trump, the prospect indeed is bleak for Europe: And the likelihood is that any of that ECB stimulus – promised for this autumn, as Mario Draghi warns that the European picture is getting “worse and worse” – will be very likely to meet with an angry response from Trump – castigated as blatant currency manipulation by the EU and its ECB. EU Relations with Washington seem set to sour (in more ways than one)....

Strategic Culture Foundation
Germany Stalls and Europe Craters
Alastair Crooke | founder and director of the Conflicts Forum, and former British diplomat and senior figure in British intelligence and in European Union diplomacy

See also

Armstrong Economics
Economic Storm Trump Will be Blamed For Because of Bad Advisers
Martin Armstrong

Pence Vs. Xi at APEC — Trump decides to skip

Is accusing China of using debt as a weapon capitalist chutzpah on the part of Pence, when it's SOP under neoliberalism — "free markets, free trade, and free capital flows" — to put less powerful countries in debt to powerful countries to the degree that they need to go to the IMF for funding to meet debt obligations, the strings attached being giving up control of their institutional arrangements, fiscal policy and national sovereignty? 

I doubt Pence will fool anyone on this, but some countries will "go along to get along" with the US.

Reuters

China says no developing country will fall into debt trap by cooperating with China

For the Chinese idiom, see

Language Log
"China has no intention to touch the cheese of any country"
Victor Mair

See also

Yahoo!
APEC leaders divided after US, China spat
Ayee Macaraig, Andrew BEATTY | AFP

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The Week
Pence vows more trade war 'until China changes its ways'

Bonnie Kristian

See also

Sputnik International
Asia-Pacific Economic Cooperation Summit Reveals Depth of US-China Division

See also

"We suggest a certain country matches its words with its deeds, rather than wag the finger at others," [Chinese Foreign Ministry Spokesperson Hua Chunying] said in the statement. "The country should treat all countries on an equal footing no matter big or small, respect other countries' right of following a development path that accords with their own national conditions and make real contributions to developing countries."
Ecns
China urges U.S. to stop wagging finger at others

Xinhua

See also

Full text of Xi's remarks at 26th APEC Economic Leaders' Meeting

Ecns
Xi calls for inclusive, rule-based world economy at APEC meeting

Xinhua

Also

Zero Hedge
"It Will Be A Cold War": APEC Summit Ends In Unprecedented Chaos After Dramatic US-China Showdown

Tyler Durden

also

SouthFront
US-Chinese Trade War Is To Escalate Further As Both Sides Are Not Going To Make Concessions

also

Reuters
APEC fails to reach consensus as U.S.-China divide deepens

also

Sputnik International
APEC Participants Adopt Final Declaration Excluding Some Controversial Issues
Related

Eisenhower's worst nightmare has come true, as defense mega-contractors climb into the cockpit to ensure we stay overextended....

The dependence on the private sector in the Pentagon and the intelligence community had reached such a point that it raised a serious question about whether the workforce was now “obligated to shareholders rather than to the public interest,” as Priest and Arkin reported. And both Gates and Panetta acknowledged to them their concerns about that issue.

Powerfully reinforcing that privatization effect was the familiar revolving door between the Pentagon and arms contractors, which had begun turning with greater rapidity. A 2010 Boston Globe investigation showed that the percentage of three- and four-star generals who left the Pentagon to take jobs as consultants or executives with defense contractors, which was already at 45 percent in 1993, had climbed to 80 percent by 2005—an 83 percent increase in 12 years.... 

Longish historical article putting things in perspective.

The American Conservative
America’s Permanent-War Complex

Gareth Porter

See also

Did "we" get our money's worth? It all depends on the meaning of "we."

Military Times
Price tag of the ‘war on terror’ will top $6 trillion soon
Leo Shane III

Alex Ward — The US is stopping trade talks with China

“China is convinced that Trump is not looking to resolve the trade dispute,” Daniel Russel, the State Department’s top Asia diplomat from 2013 to 2017, told me last month. Instead, he says, the Chinese feel Trump is merely using trade issues as a way “to undercut China.”

According to multiple sources, Trump’s goal is to severely hurt China’s economy, mostly by making it so hard for companies to do business there that they go elsewhere. The tariffs are one way to do that. 

It helps explain why Trump is in no rush to solve the trade dispute even though top economists say it will hurt the global economy....

Russia is also charging that US sanctions are anti-competitive devices aimed at US global monopoly.

The upshot is likely a protracted trade war unless the ROW caves to the US.

“If President Trump’s strategy is to enter into a political and economic pain tolerance test with Xi Jinping, he is going to need to condition expectations with the American people and ask them to sacrifice,” he told me.

Good luck with that. The ROW can take a whole lot more pain than Americans, who hate even discomfort.

US farmers are already seeing the soybean market they had with China being replaced by other suppliers. Russia also has offered China a large tract of adjacent land to grow soybeans themselves for import substitution. When suppliers are replaced, those markets tend to be permanently lost.

VOX
The US is stopping trade talks with China

Alex Ward

See also at VOX

For the past several months, President Donald Trump has been waging a costly trade war with China, which has had no shortage of ill effects on US farmers.

The Trump administration cut more than $25 million worth of bailout checks to the agriculture industry in September, just a few months after the president announced a $12 billion aid package for US farmers coping with retaliatory tariffs that foreign countries have imposed on their products.

But now it’s clear that the tax subsidies won’t just help US farmers — they’ll help their foreign competitors too, and will likely benefit many of the countries Trump is supposedly targeting.

The news is the latest twist in the president’s trade war with China, which was supposed to help American workers and businesses but has been hurting them instead. Trump’s trade war is failing, and hurting the US economy, and he doesn't seem to care....

Trump’s bailout for farmers hit by trade war will also benefit Chinese companies
Alexia Fernández Campbell

Zero Hedge — Former Fed Governor Warns Of "Several Decade Cold War" With China

Zero Hedge
Former Fed Governor Warns Of "Several Decade Cold War" With China

Tyler Durden

Menzie Chinn — “So China Is Now Paying Us Billions of Dollars in Tariffs”

How does a tariff work? A tariff is a tax on imported goods, so if a Chinese good is sold to an American, the American literally has to pay the tax.

The quote above is from Mr. Trump, as recounted in Peter Coy’s “The Real Pain From Trump’s Tariffs Trickles Down to Consumers” in Bloomberg Businessweek; it clearly highlights the fact that either (1) Mr. Trump has no understanding of how tariffs work, or (2) he does understand, and he’s lying....

Trump is apparently assuming that the price remains the same domestically for the imported good and the exporter lowers the price to accommodate the tariffs. 

Minzie Chinn explains why that is magical thinking, given the reality. Tariffs spell higher prices for imports domestically. 

This is essentially a tax on consumers of imported goods.

Econbrowser
“So China Is Now Paying Us Billions of Dollars in Tariffs”
Menzie Chinn | Professor of Public Affairs and Economics, Department of Economics, Robert M. La Follette School of Public Affairs, University of Wisconsin at Madison, and Co-editor, Journal of International Money and Finance

Frank Tang — Is China still willing to open its financial sector during trade war?

Is Beijing aware of the trap being set? It would be crazy to follow through with liberalization of the financial sector, inviting Western takeover.

Defend Democracy Press
Is China still willing to open its financial sector during trade war?

Frank Tang

See also

“We at the Trump administration have updated our China policy to bring the concept of competition to the forefront. It’s right there at the top of the president’s national security strategy.”

Revealing.

US tells China: we want competition not cooperation

Keegan Elmer

See also

Bannon: Trump Willing to Make Trade War ‘Unbearably Painful’ for China

See also

Trump’s foreign policy is simple. Do everything possible to support and placate Israel and everything necessary to isolate and contain China.

Fort Russ

Trump’s Bromance With Kim Jong-un Has One Aim: Isolate China

Denis Elter

See also

Beyond projection. Accuse the victim of what you are doing yourself.

Sputnik International
Washington to Accuse China of Leveraging World Trade to Weaken US - Reports

See also

If the initial proposal is approved, the missions could be expanded to Russian territory, because the only thing smarter than provoking China is provoking China and Russia.…

Zero Hedge
US Navy Proposes A "Global Show Of Military Force" As A Warning To China

Tyler Durden

See also

U.S. Vice President Mike Pence, sharpening U.S. criticism of Chinese policies around the globe, will give China a blunt warning on Thursday that the United States will not back down from what Washington sees as Chinese intimidation in the South China Sea.

Collision course. US deciding to take on China kinetically before it gets any stronger militarily?

Message to the US: China is not going to back down in its own backyard, and you are 5000 miles away from home. That's a long way to stretch the logistics. If it is not over fast, you are toast. Do you really think you can win a land war in Asia when you can't even handle a rag-tag band in Afghanistan? Get serious.

Reuters
Pence to tell China: We will not be intimidated in South China Sea

Roberta Rampton

Keyu Jin — What China Can Gain from Trump’s Trade War

An unintended outcome of US President Donald Trump's trade war is that China will reduce its reliance on foreign trade and imported technologies. The end result could be a China that is stronger, more resilient, and possibly less willing to acquiesce to US-designed rules.

No brainer. I've been saying this since the beginning of the so-called trade war. Like Russia, this is just forcing China to speed up what it was already committed to do in becoming more self-sufficient and developing the domestic economy through import substitution and restructuring the economy to increase production for domestic consumption instead of export. Not that China will cease being an export powerhouse by any means, but it will reorient exports more toward the emerging world instead of the developed world.

It will also greatly speed up the the development of the military-industrial complex, as it also has it Russia, accelerating the arms race and worsening Cold War 2.0.

The US is creating the adversaries it should most fear. In hindsight, this will be viewed as one of greatest strategic blunders in history, if there is still a future in which to reflect upon it should this result in a nuclear WWIII.

The upside is that all the military spending will stimulate "growth," and it will also likely lead to new technologies with civilian application, in particular AI, which has become the new "holy grail."

Project Syndicate
What China Can Gain from Trump’s Trade War
Keyu Jin | tenured associate professor of economics at the London School of Economics, World Economic Forum Young Global Leader, a member of the Richemont Group Advisory Board, Beijing born and Harvard educated.

See also

Unrealistic model.

Reuters
U.S. has most to lose from trade war, China would benefit: ECB

Anatole Kaletsky — Why the US Would Lose A Trade War with China

In handicapping the US-China conflict, Keynesian demand management is a better guide than comparative advantage. In principle, China can avoid any damage at all from US tariffs simply by responding with a full-scale Keynesian stimulus....

Trump’s surprisingly successful rhetorical technique of “shout loudly and carry a white flag” helps to explain the consistent inconsistency of his foreign policy. The US-China trade war is likely to provide the next example.

Project Syndicate
Why the US Would Lose A Trade War with China

Anatole Kaletsky | Chief Economist and Co-Chairman of Gavekal Dragonomics and a former columnist at the Times of London, the International New York Timesand the Financial Times

See also

The sanctions for $50 billion, which have already been imposed, the new package for $200 billion on September 24, and even the prospect of imposing prohibitive duties on all Chinese exports are clearly not the full scenario of the anti-China strategy.

It is a multilateral, hybrid war, where trade and economic measures are only part of the arsenal. There are already attempts to influence China’s domestic policy, to weaken the position of the Communist Party.

However, our American partner must be confident that no country should expect China to trade its key interests, no one can have the slightest hope that we will taste bitter fruits of infringement of sovereignty, security and interests of the state.

As for the China-Russia relations, America’s announcement that Moscow and Beijing are its strategic rivals only brings us closer. As the Russians say, behind bad luck comes good luck.

China will invest to the Russian agriculture at the expense of the US treasuries in order to import more quality Russian products; to the joint design and production of wide-body planes instead of Boeing; to the development of the Russian Far East and the adjacent Northeast of China. And recently poor but now well-to-do Chinese tourists will willingly visit the beautiful Russia, which is close to our hearts.

Well, China and Russia will become even closer to each other, they will stay back to back to repel common challenges, and hand in hand for the development of their economies….

Valdai Club (Russia)
Trade War Is Only Part of the US Deterrence Strategy
Sheng Shiliang | Senior Research Fellow, Global Challenges Studies, Xinhua News Agency; Researcher and Director of Russian Internal Affairs Office, Euro-Asia Social Development Research Institute; and Executive Member of Center of Shanghai Cooperation Organization Studies

See also

In an exclusive interview, the former White House chief strategist says Beijing was caught off guard by the magnitude of the plan he hatched with Trump...

 South China Morning Post
‘Trump won’t back down’: US president plans to make trade war unbearable for China and bigger than ever, Steve Bannon says
Sasha Gong

See also

AlterNet
Trump Thinks He Has the Advantage in His Trade War with China — But It Could Backfire in a Big Way
By Marshall Auerback | Independent Media Institute

See also

Sputnik International
China, Russia Capable of Outlasting US’ Economic Attacks

Zero Hedge — Ex-PBOC Head Warns China's Exporters Could Soon Ditch The US

Former Chinese central bank governor Zhou Xiaochuan suggested on Wednesday that the direct impact on China of the trade war with the US "appears limited," though it could quickly prompt China’s top exporters to pivot away from US markets. Xiaochuan, who left the bank in March after 15 years at the helm, told Reuters that China's economy would be stable in 2018, with an expected growth rate of 6.5%….

Reuters said Xiaochuan downplayed the idea that protectionism will severely affect economic growth in China, which he said had been estimated at 0.2-0.8% of GDP…. 

As a result of the peak in "hyper-globalization", China is being forced to change its growth strategy after many decades. The economic driver of supplying Western markets with cheap goods and constructing ghost cities in China are over. “Whether this is reaching the peak or has peaked and maybe going down, we need to find some new economic growth driver," said Xiaochuan....

Zero Hedge
Ex-PBOC Head Warns China's Exporters Could Soon Ditch The US

Tyler Durden

Zero Hedge — Trump Tells Pompeo Not To Go To North Korea: "Not Making Sufficient Denuclearization Progress"

Trump then blamed China, saying that "because of our much tougher Trading stance with China, I do not believe they are helping with the process of denuclearization as they once were (despite the UN Sanctions which are in place)." This is in line with Trump's complaint from early July in which he said that with respect to the denuclearization process, China "may be exerting negative pressure on a deal because of our posture on Chinese Trade."

Learning that unlike private deals, deals on the world stage among governments are interlinked and influence each other.

Zero Hedge
Trump Tells Pompeo Not To Go To North Korea: "Not Making Sufficient Denuclearization Progress"

Tyler Durden

Reuters — U.S. calls foreign mail system unfair in surprise win for Amazon

In effect, a tariff.

Reuters
U.S. calls foreign mail system unfair in surprise win for Amazon

Pepe Escobar links

The first is a should-read. The second is a backgrounder.

Asia Times
Sun Tzu and the Art of Fighting a Trade War

From Baltic Sea to Black Sea, Russia aims for a win-win

Pepe Escobar

Timothy Taylor — Some Facts on Global Current Account Balances

Maybe the trade war with China isn't actually about MAGA at all, but just economic warfare against a rising competitor. If trade surplus are so "unfair," why is the focus not on Germany given the figures, enquiring minds want to know. Or, do Donald Trump and his economic team not realize this?

Conversable Economist
Some Facts on Global Current Account Balances
Timothy Taylor | Managing editor of the Journal of Economic Perspectives, based at Macalester College in St. Paul, Minnesota

Adair Turner — Trade Barriers Will Not Stop China’s Rise

If, back in the 1980s and 1990s, the US government, rather than arguing for Chinese economic opening, had prohibited any US company from investing there, China’s rise would have been significantly delayed, though not permanently prevented. Because that did not happen, China’s rise is now self-sustaining....

Project Syndicate
Trade Barriers Will Not Stop China’s Rise

Adair Turner | Chairman of the Institute for New Economic Thinking, former chairman of the United Kingdom's Financial Services Authority, and former member of the UK's Financial Policy Committee 

Zero Hedge — Blowback - Nasdaq Plunges After China Blocks Micron Chip Sales

Potentially in response to Trump's actions on China Mobile, a Chinese court temporarily banned Micron Technology chip sales, cutting the U.S. company off from the world’s largest semiconductor market. 

Yesterday we specifically warned that following yet another targeted attack at a prominent Chinese company, it is only a matter of time before China responds in kind, and considering the size and prominence of China Mobile, one wonders howlong until China takes aim at none other than the world's largest company, Apple… 

Bloomberg reports that in a patent ruling in favor of Taiwanese rival United Microelectronics (UMC), the Fuzhou Intermediate People’s Court of the People’s Republic of China issued a preliminary injunction stopping Micron from selling 26 products, including dynamic random access memory and Nand flash memory-related products, UMC said in a statement Tuesday....

Zero Hedge
Blowback - Nasdaq Plunges After China Blocks Micron Chip Sales

Tyler Durden

Zero Hedge Trump Drops New Bomb In Trade War: Plans To Restrict China Investment In US Firms

The FT reports that according to officials and people briefed on the discussions, the administration has decided to restrict China’s ability to invest in or acquire US companies in the industries identified by Beijing in its so-called Made in China 2025 plan.…

"The Trump administration, kind of across the board, has very much blurred the line and seems to be saying that any significant economic challenge the US faces is also a national security challenge." 

This is not new actually. It is integral to the neoconservative Wolfowitz Doctrine of February 1992. But it is also part of a strategy that Steve Bannon brought to the Trump campaign and early administration. Since Bannon's (and others') departure, the neocon faction has grown in power and influence.

The so-called trade war that is developing is pretty naked economic warfare.

Zero Hedge

Trump Drops New Bomb In Trade War: Plans To Restrict China Investment In US Firms

Tyler Durden

See also

Global Macro Monito
Chain Ganging The Supply Chain With Tariffs

Sputnik International — Tariffs? Meh: China Has Other Ways to Answer On Trump’s Trade War

The Chinese economy has plenty of ways to counter US President Donald Trump's import tariffs apart from simply imposing parallel measures, writes Politico's authors Adam Behsudi and Doug Palmer, that have been used in the past and proven to be very effective.

One misapprehension in the article, perhaps since the authors are American and influenced by American views of how China functions, is that the Chinese government can suggest a boycott of US imports that would be effective. The reality is that Chinese citizens are extremely patriotic and the government would not need to say anything for a boycott to arise spontaneously.  The US is already risking this.

Sputnik International
Tariffs? Meh: China Has Other Ways to Answer On Trump’s Trade War

See also

The American government is the initiator of evil.

Taking off the gloves, and preparing the Chinese people for the global economic chaos that may be coming.

Global Times
Trump's trade war will disrupt world economic order

Editor : Li Yan

John Helmer — Global News Hour Radio, Canada — Little Miss Ukraine Is Barking Up The Wrong Tree

Canada has endorsed US trade warfare against China, Russia, the European Union states, Iran, North Korea, and Venezuela, but registers its dismay when the Trump Administration refuses to give Ottawa an indemnity pass so that it can benefit from the damage inflicted on the others.

Foreign Minister Chrystia Freeland has accepted a “Diplomat of the Year Award” from Foreign Policy Magazine, a subsidiary of the Washington Post and the Jeffrey Bezos media conglomerate which is sworn to topple President Donald Trump. Freeland’s supporters in the Liberal Party claim she has been exceptionally effective lobbying for Canadian interests in the US. After her lobbying has failed, Freeland claims it is unfair, absurd and illegal for the White House to threaten Canada with penalty duties on steel, aluminium, and cars.

In all common sense what can Canadians expect from the Americans if this is how Canada’s leaders behave?

What was Justin Trudeau thinking when he appointed Chrystia Freeland as foreign minister?

Dances with Bears

Global News Hour Radio, Canada — Little Miss Ukraine Is Barking Up The Wrong Tree

John Helmer