What is Trump Afraid Of? China Answers: Made in China 2025

iFeng: 特朗普到底在怕什么？

What is the United States worried about?

According to public information, the United States imposes tariffs on China's products mainly in these major areas: high-speed rail equipment, aviation products, new energy vehicles, a new generation of information technology, industrial robots, agricultural machinery and equipment, new materials, bio-medicine, high-performance medical machinery Wait.

There are many types, but it can be summed up in one sentence: almost all involve the strategic tasks and priorities of "Made in China 2025". For example, a new generation of information technology, new materials, biomedicine, rail transportation equipment, large aircrafts, and so on.

In these areas, China has clear goals and plans. If all goes well, it means that by 2025 China will enter the top rank in these fields.

At present, the United States is still the leader.

Bai Ming, deputy director of the International Market Research Department of the Ministry of Commerce Research Institute, told the China News Agency that it was a through train. Trump imposed tariffs on China in 2018, apparently putting the roadblocks on the front.

"Fearful that China's industry will develop to a certain stage in the future, it will replace the dominant position of the United States in the international division of labor," said Bai Ming.

What is behind the status?

In the past, the United States has used its dominance in the international division of labor to obtain large excess profits and even supported the status of the US dollar.

China’s move in the manufacturing industry clearly caused Trump’s concern.

As a result, trade frictions between China and the US have frequently appeared.

Related background from January 2018: Top-level design of Made in China 2025 completed, ministry says

According to Miao, a group of key landmark programs and projects have been launched in areas such as manufacturing innovation, intelligent manufacturing and green manufacturing, and the country has climbed to a new level in building a manufacturing powerhouse.

On August 30, 2016, the Ministry of Industry and Information Technology (MIIT) announced China will set up around 40 national manufacturing innovation centers by 2025, according to Xinhua.

Miao said five national manufacturing innovation centers have been completed so far and 48 provincial manufacturing innovation centers have been nurtured, which has formed a manufacturing innovation system that takes the national innovation center as the core node and the provincial manufacturing innovation centers as important supplements.

In priority areas such as large aircraft, integrated circuit, new material, aircraft engine and gas turbine, 5G as well as new energy vehicles, positive results have also been achieved, Miao said.

Back to the iFeng article:
How does China-US trade friction end?

The U.S. proposal for the return of manufacturing industries not only reflects that the United States simply wants the return of manufacturing, but also reflects the United States’ desire to maintain its position in global politics, economy, and international affairs.

However, China is not the same poor China.

For China-US trade friction, China’s attitude is cautious and firm.

I didn't paste the parts that recite free trade talking points such as importing solar panels creates jobs. The issue isn't employment but the types of jobs and the supporting industries, research and development, that accompany high-tech manufacturing.

Bai Ming believes that China will not lose the bottom line when it comes to principles.

In other words, this is a game and negotiation process between the two parties.

At the same time, we must also see how the United States' deterrence against China compares with China's deterrence against the United States, its dependence on China, and its anti-dependence and strength.

Last time, China responded to the “232 Measures for Imports of Steel and Aluminum Products of the United States” and intended to impose tariffs on some products imported from the United States to balance losses.

In the face of the United States' tariff increase on China’s 60 billion U.S. dollars, what measures China will have? We are not aware of this.

However, it is certain that China will take all appropriate measures to firmly defend the interests of the country and the people.

The aforementioned report believes that China and the United States should transform themselves from globally competitive competitors into global winners, and truly create products from "Made in China" to "Made in China and the United States," creating a new situation for win-win development in manufacturing.

China wants to draw the United States into a dependent bilateral relationship. It wants to knock the United States off its perch as the premier global economic power. The people in charge on the United States have through malice or stupidity, chosen to give away the nation's advantage. Structural issues are in play that restrict policy maker choices. Good luck winning an election based on entitlement reform and slashing debt-fueled consumer. However, coupling mass unskilled immigration with a free trade policy that is premised on the need to obtain cheaper labor overseas destroy's a nation's middle class by crushing its wages.

As for a trade war, the key point missed by nearly everyone is that the calculation changes dramatically if we are talking about sovereignty and political power instead of economics. Even though a trade war could be long-term beneficial for the United States by forcing reforms that politicians will never vote for, it will have a short-term economic cost. There will be major disruptions even if there are winners (as happened with free trade, but condensed into a few years instead of forty). Those decrying Trump's actions on economic grounds are on shakier ground than they believe, but they are on relatively solid ground when it comes to disruption and risk. If all you care about is GDP, a strong case can be made against trade war. The higher your time preference, the stronger the argument.

If the issues at stake go beyond economics, the calculations change. We don't yet know how serious Trump is about confronting China. He might want a simple deal that lowers the trade deficit by $100 billion and then claims victory, but does nothing to reform the economy. But he might have advisers from the Pentagon who argue an economic recession is a small price to pay if it can cause a depression that sets China back a decade.

The stock market was not worried that the drop in international trade would tank the US economy. International trade was small as a percentage of the US economy, roughly 4% total. But, that 4% of international trade was servicing the accumulated lending that amounted to anywhere from 30-50% of the value of the entire US economy. The tariff meant that firms would not be able to service the money lent to them by Americans and, thus, lead to massive bond defaults.

Luttwak argued for reducing China's growth rate through restrictive trade policies in The Rise of China Vs The Logic of Strategy. China is vulnerable because of its monster debt growth that far exceeds the 1920s U.S. A major financial crisis was possible well before Trump took office. A modest level of tariffs that creates secondary and tertiary effects in the financial markets could be enough to push China into a serious slowdown.