Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Trump vs China

By Michael Knox - posted Thursday, 13 September 2018


To address these problems, Trump has three objectives. The first of these is to increase risk to manufacturing firms moving from the US to China. Originally that risk was removed by stabilising the level of tariffs. By merely moving around the level of tariffs of Chinese imports the odd States, Trump re-establishes and reintroduces that risk. That immediately makes the sunk costs of a US firm moving to China so potentially great that US firms simply stop moving.

The first objective of stopping more American firms moving to China has already been achieved by increasing uncertainty of US tariffs.

Advertisement

The second objective is motor vehicle tariffs. In April, the White House noted that if the US imports a motor vehicle from China, the US charges a tariff of 2.5%; but if China imports a motor vehicle from the United States, it charges a tariff of 25%, 10 times as much.

The intermediate objective is to get the Chinese to reduce their motor vehicle tariffs for imports from the US. The result of that reduction would be to generate more employment in the eastern heartland that is the Trump base.

The third objective is much more dramatic and much more aggressive. The source of this is Peter Navarro, who is the Director of Trade and Industrial Policy and Head of the White House National Trade Council. In 2011 Navorro wrote a book called "Death by China". More importantly for this discussion, in June this year Navarro also issued a document titled How China's Economic Aggression threatens the Technologies and Intellectual Property of United States and the World. In this he lists 27 things that China currently does which are against the rules of the World Trade Organization in dealing with intellectual property. These are show in Figure 1 drawn from that document.

There are five big sections and I'll just refer to a few of them. The first is physical theft and cyber enabled theft of technology and IP. Well, that is pretty straight up, isn't it? There are five sub items: physical theft of technologies and IP through economic espionage, cyber enable espionage and theft, evasion of US export control laws, counterfeiting and piracy and reverse engineering.

The document list four further major issues. These are coercive and intrusive regulatory gambits; economic coercion; information harvesting (I think that means spies); and State-sponsored technology seeking investment.

Conclusion

Advertisement

This is big power rivalry at its best. The initial objectives that Trump wanted to achieve of stopping US firms making an investment has already been achieved by increasing the uncertainty with respect to tariffs.

The second objective will be a negotiation about Chinese automotive tariffs. I think that there will be some kind of resolution made in the next year.

The major issue is the Chinese theft of US technology. This matter will take many years to negotiate. These issues will be with us for some time to come.

  1. Pages:
  2. 1
  3. Page 2
  4. All

This article was first published by Morgans.

Disclaimer

The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual’s relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so. Those acting upon such information without advice do so entirely at their own risk.

This report was prepared as private communication to clients of Morgans and is not intended for public circulation, publication or for use by any third party. The contents of this report may not be reproduced in whole or in part without the prior written consent of Morgans. While this report is based on information from sources which Morgans believes are reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect Morgans judgement at this date and are subject to change. Morgans is under no obligation to provide revised assessments in the event of changed circumstances. This report does not constitute an offer or invitation to purchase any securities and should not be relied upon in connection with any contract or commitment whatsoever.



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

9 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Michael Knox is Chief Economist and Director of Strategy at Morgans.

Other articles by this Author

All articles by Michael Knox

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Article Tools
Comment 9 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy