August 27, 2019
Time: 8.15 am
US-China Trade War:
I have been thinking of writing my views about US-China Trade War.
But reluctant to write as I thought who is going bother about my views.
Finally I decided to write no matter who bothers.
First, what was the thinking by US side.
Trump thought US is a big brother.
He wanted to renegotiate trade deals with many countries, so that he will always be in limelight.
A much better deal with China will increase his prospects in the next election.
Anyway next election is in 2020, so he thought any good deal before election will be very good for him.
Therefore the time was on his side when he started the negotiation about 18 months before.
He did not want to sign any agreement immediately and hence put some unresonable demands.
China was trying its best to strike a deal.
But due to Trump's election strategy, it was highly impossible.
Even if China has agreed to all of Trump's demands, he would have demanded more.
So China has learned to live with this difficulty.
Now come to China's side.
In a moviw, Hero who is a very poor guy will get into confrontaion with Villain who is super rich.
At some point Hero will say, "Look I am too poor, your too rich. DO not ever play with too poor people as they have nothing to lose in the fight whereas you have lot of things to lose"
First China is not a Democratic country.
President of China is not worried about next election.
So he need not take any decisions based on election.
But that is not true in case of Trump.
Second, China is anyway is not a rich country.
They know how to survive with lot of difficulties.
Still People will stay with Govt (you may say they have no other alternative)
But people of America has been livin with all kinds of luxuries.
Now when they are forced to pay more for chinese goods due to higher tariff, surely they will get annoyed.
That may reflect in the next election.
China played the same trick with Trump.
Trump delibrately delayed the deal and kept increasing tariff to show his "America First".
At some point of time, China thought it will be losing its face if they strike a deal with Trump.
Anyway the deal has been delayed for more than 18 months, instead of signing the deal and helping Trump to win next election, why not suffer some more time, until next election, so that Trump will get more angery, will announce more tariffs and eventually he will lose next election.
In a movie, villain will come from abrod and kidnap hero's father.
He will tell him, "I have come from abroad to tackle your son"
The father will reply, "You did not come, it is my son who made you to come, now you are trapped"
So every time Trump announce something against China, China is actually happy.
Trurmp is thinking he is palying his cards.
But it is actually China which is playing perfectly.
Even if Trump increases tariff by another 100%, how long it is going to last?
China carefully targetting Trump's supportes while announcing tariff.
They choose the products for higher tariff, for example Soya ban, primarily to hurt Republicans as majority of farmers support Trump.
By his nature, Trump is very impulsive.
That is evident from his tweets.
There is no other world leader who will tweet like him.
One day he will say, "President Xi is my very good friend"
Next day he will say, "Who is bigger enemy, Fed Chair or President Xi"
Next day, he will say, "President Xi is a nice person"
His tweets is the single most reason for huge volatility is world markets.
Now Trump is in Catch 22 situation.
What started as a delay tactics, led to ego problem.
That is where exactly the success of China lies.
There may be short term pain for China but in long term Trump will lose.
So for stock market nvestors and traders, the volatility is likely to continue for next one year or so.
Moral:
1. In a War, no one is winner.
2. No matter how strong you are, there is no guarantee that you will win the war.
3. Focus more on enemy's weakness than your strenth in a war.
Note: I am neither s supporter of China nor US. This is just my view.
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