Trade war, day 103: ‘Christmas 2019 could be tricky’ | Politics News | SupChina

Trade war, day 103: ‘Christmas 2019 could be tricky’

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Twice a year, thousands of Chinese export companies and potential customers gather in Guangzhou for the China Import and Export Fair, also known as the Canton Fair. When Reuters polled Chinese export companies at the last Canton Fair this spring, “only a quarter” of them expected a full-blown trade war with the U.S.

About $250 billion worth of traded goods under tariffs later, the three-week Canton Fair going on right now is decidedly more pessimistic. Reuters’ poll of export companies this time showed that “more than 60 percent expected the trade war to last at least another year.”

Bloomberg also has reporters on the ground in Guangzhou and is updating this post with insights from specific companies: Canton Fair: How China’s exporters are handling trade war (porous paywall). Of note: “Christmas 2019 could be tricky,” because “holiday decorations are the type of low-margin, labor-intensive consumer goods for which the companies that manufacture them would suffer if the U.S. subjected them all to tariffs.” And though one Christmas-oriented company said it had not been hit by tariffs yet, they said it would be impossible to quickly relocate more production to Vietnam to avoid further tariffs that have been threatened.

Also at the top of that Bloomberg article is a video interview with economist Andy Rothman, whose comments are worth noting:

  • A “significant mistake being made in Washington” is that American officials are both underestimating the Chinese economy and overestimating the importance of exports to the Chinese economy. Some notes on that:
    • President Trump and some of his advisors have repeatedly conflated the Chinese stock market with the broader Chinese economy, even though they are very separate things. The Chinese stock market has been battered by the trade war; the Chinese economy has not been much.
    • Rothman has written before about how “The Chinese economy is no longer export-driven. Net exports (the value of a country’s exports minus the value of its imports) account for only 2% of China’s GDP, down from a peak of 9% in 2007.”)
  • Rothman predicts we’ll see a resolution to the dispute “within the next few quarters,” partly because the impact on the U.S. economy will become substantial.
  • “The President’s in deal-making mode,” with trade tensions having recently been reduced with Canada, Mexico, the EU, and South Korea.
  • It’s not clear that Trump wants decoupling of the U.S. and Chinese economies, even though that is the apparent goal of many of Trump’s advisors. Trump may be satisfied if he ends up getting a deal for just “more market access” and “better protection for IPR,” Rothman says.

More U.S.-China and trade war news:

  • American politics
    Trump urged to declare China a currency manipulator / Economic Times of India
    Tammy Baldwin, a Democratic senator from Wisconsin, is not happy that Trump hasn’t labeled China a currency manipulator as he had promised. She wrote a letter to the Trump administration urging it to do so in its upcoming currency report — but Politico has reported that there are no plans to name and shame China in that report. (also, economists generally don’t agree with Baldwin — China is not significantly artificially depreciating its currency these days, even to offset the trade war impact)

Previously in SupChina’s trade war coverage:

Trade war, day 98: Trump and Xi to meet at end of November

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Lucas Niewenhuis

Lucas Niewenhuis is an associate editor at SupChina who helps curate daily news and produce the company's newsletter, app, and website content. Previously, Lucas researched China-Africa relations at the Social Science Research Council and interned at the Council on Foreign Relations in New York. He has studied Chinese language and culture in Shanghai and Beijing, and is a graduate of the University of Michigan.

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