One may wonder why US President Donald Trump, who was shrewd, intelligent and successful billionaire businessman before becoming President, wants to drag his country into trade war with China. In reality he has no choice but to balance books, both on home-front, Federal Budget, as well as on foreign trade where US accumulates $750 billion overall annual deficit, China alone is responsible for $375 billion.
US imports from China consists of metals, computers, electrical goods, machinery, furniture, leather, plastic and consumer goods Americans use in their homes. All these items were once manufactured in US, until cheap, highly subsidized goods from China killed these industries. Now US consumers are captive market for China.
US total debt is nearing $20 trillion. It may become unsustainable in a decade if allowed to grow unchallenged. All previous Presidents knew this but no one had courage to take appropriate action, rock the boat and become unpopular on world stage. It was selfish, self-preservation at any cost!
Main creditors for US are Japan and especially China who holds some $2 trillion in Federal Government’s Treasury Bonds and stocks. China is clever, cunning, intelligent totalitarian nation who would fight tooth and nail against Trump targeting $60 billion Chinese import, although this is tiny amount, considering overall import.
China has already targeted US imports of £3 billion, mainly food, such as soya beans, rice, fruits, beef and pork to feed 1:4 billion Chinese who are growing rich at the expense of US, EU and even India who also has significant trade imbalance with China.
If it comes to all-out trade war between US and China, there could be only one winner, US. But China can use financial “Nuclear Option” that is to dump US bonds it holds on international market, that will weaken US dollar, forcing US to increase interest rate domestically and making borrowing expensive indeed. This is game of chess that cleverest entity with inexhaustible patience can win, that is totalitarian China!
Bhupendra M. Gandhi
By email
