China "holds the cards", they know it, Trump probably worries that they might. Despite this, he has gone "all in", and China is calling his bluff. Trump is squirming, and this is part of why he pulled back on the electronics tariff.
China holds the cards, because the US doesn't have the leverage over their economy that Trump thinks. Some people probably think that the over half their (50%+) economy is tied to exports to the US. Others may feel it is not that large, but still significant. perhaps being 20% of their economy is tied to US exports.
The real number is that 20% of China's GDP is due to total exports. The US represents 15% of their total exports, so, 20% * 15% = 3%. Losing 3% of their GDP may cause a recession, but not crushing.
Electronics, that were paused, are about 25% of their US exports, so now that means our tariffs only threaten about 2.25% of their GDP, probably not enough to even cause a recession.
There are two factors that could mitigate of much that 2.25%. If China strikes deals with the other nations in increase their imports by 10%, then (2.25% less 85% * 10%) that lowers the 2.25% down to only 1.4%.
A problem that China has been seeing is that the populations savings rate is too high. China has been discussing how to increase internal consumption. The have been toying with the idea of a stimulus to do that. The trade war could be the forcing function to get the government to do that stimulus. Bottom line is that Trump's tariff war may be doing a favor for China, forcing them to fix their internal demand problem.
For the US, a trade war has greater leverage on our economy than the numbers would suggest. While imports from China are small compared to the size of our overall economy, the "inputs" to our economy (i.e. component parts in products we produce) are widespread and will have a significant inpact. We have a diverse J-I-T (just in time) supply chain, so even just one small input (component) can be very disruptive! Then, of course, there is the critical, and rare, minerals that also create leverage.
China is holding all the cards, while Trump has gone 'all in' on a losing hand.
China "holds the cards", they know it, Trump probably worries that they might. Despite this, he has gone "all in", and China is calling his bluff. Trump is squirming, and this is part of why he pulled back on the electronics tariff.
China holds the cards, because the US doesn't have the leverage over their economy that Trump thinks. Some people probably think that the over half their (50%+) economy is tied to exports to the US. Others may feel it is not that large, but still significant. perhaps being 20% of their economy is tied to US exports.
The real number is that 20% of China's GDP is due to total exports. The US represents 15% of their total exports, so, 20% * 15% = 3%. Losing 3% of their GDP may cause a recession, but not crushing.
Electronics, that were paused, are about 25% of their US exports, so now that means our tariffs only threaten about 2.25% of their GDP, probably not enough to even cause a recession.
There are two factors that could mitigate of much that 2.25%. If China strikes deals with the other nations in increase their imports by 10%, then (2.25% less 85% * 10%) that lowers the 2.25% down to only 1.4%.
A problem that China has been seeing is that the populations savings rate is too high. China has been discussing how to increase internal consumption. The have been toying with the idea of a stimulus to do that. The trade war could be the forcing function to get the government to do that stimulus. Bottom line is that Trump's tariff war may be doing a favor for China, forcing them to fix their internal demand problem.
For the US, a trade war has greater leverage on our economy than the numbers would suggest. While imports from China are small compared to the size of our overall economy, the "inputs" to our economy (i.e. component parts in products we produce) are widespread and will have a significant inpact. We have a diverse J-I-T (just in time) supply chain, so even just one small input (component) can be very disruptive! Then, of course, there is the critical, and rare, minerals that also create leverage.
China is holding all the cards, while Trump has gone 'all in' on a losing hand.