You’ll notice how I pitted the president of the United States, Donald J Trump as an individual against China and not the United States as a country against China. This is because I really don’t believe there’s a common consensus amongst US citizens that Trump should be engaging in a trade war with China, solely on grounds that the two countries have two different political systems.
I mean in China there’s somewhat of a dictatorship, which means that the government pretty much represents the voice of its people, whether they agree or disagree with the ensuing policies adopted and implemented. In the United States on the other hand, the president is supposed to be going on what the people generally require of him, but it appears as if the current president has very little regard for the common sentiment.
I hope that this is about as political as I’m ever going to get with my posts on this blog, but then again politics is so closely related to economics that this might prove to be impossible.
So anyway, I’m with those who are of the general belief that it’s not a good idea for Trump to be picking fights such as that of a trade war with China. I believe the US could be headed for disaster in that case, early signs of which can be seen in the floundering strength of the US dollar.
The impact on the currency is only a tip of the iceberg though – there are so many other indicators which suggest that a trade war is never in order, but it’s rather late as of right now because pulling out of the trade war at this moment would make for somewhat of an admission of having made the wrong move. That’s not something Mr. Trump would be willing to do anytime soon, if ever…
The reason why any trade war with a country like China would indicatively not end well for the USA though is because of the long established economic ecosystems which exist in the two countries, which are pretty much polar opposites to say the least. For one, the true-world value of a singular dollar goes a lot further in China, which is why China has been associated with being a source for cheap labour for such a long time.
One of the immediate consequences of a trade war would be the need for working class citizens of both countries to be prepared to take a drastic pay-cut, or rather to make do with the type of income that simply cannot sustain the average middle-class life in the United States, whereas in China it would do just fine.
Look, given the trade deficit between the USA and China, there’s no question about the fact that the US would have needed to restructure things a bit, but a trade war is not the way to do it. A drive to have more locally manufactured goods consumed and perhaps exported to other countries would have been a better approach, not going head to head with a country that is a source for very cheap labour.