The US-China Economic Chess Match

Trade War or Gamesmanship?

Quibbl asks if strategic maneuvering by the world’s two economic superpowers will continue to escalate

By Jonathan Silverman

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On August 17th, President Trump announced he struck a deal with Argentina to resume exporting American pork to the South American country after a hiatus of 25 years. On the surface, the benefits for the US are clear: a nation that adds to its total exports adds to its savings, as individuals in good financial health make more money than they spend. The move symbolizes the current administration’s renewed political and economic focus on trade deals that are beneficial, or at least that are perceived to be beneficial, to American interests.

Interestingly, the US is already the top exporter of pork in the world.  Isn’t there more revenue to be had with snapping up export opportunities of future technologies? China seems to think so; they’re investing $411 billion dollars to build 5G mobile networks, a project estimated to create 8 million new jobs. Beyond mobile infrastructure, longstanding Chinese hegemony over rare earth materials is also a concern for some American leaders – a top rare earth industry CEO recently met with the President and made the case for nationalizing America’s only rare earth mine to protect it from a Chinese government-backed takeover.

The economic maneuvering from the two global superpowers adds to the interest generated by President Trump’s aggressive rhetoric on the nature of the trade relationship. On August 14, the President further escalated the situation by authorizing an inquiry into China’s alleged theft of intellectual property, a potential crime with 600 billion dollars in damages. Is this the first in a flurry of unilateral moves to create a more protectionist economic policy against Beijing? Or is President Trump waiting to see what the political landscape will look like after the leadership transition at the 19th National Congress of the Communist Party of China in October? After all,  the American President said he formed a great relationship with President Xi during Xi’s visit, and President Trump may not want to complicate President Xi’s own critical maneuverings in the backroom power struggles common during communist regime transition.

Will the Trump administration announce another protectionist measure against China by the end of October? Quibbl here.  

Furthermore, as reported on August 15th, U.S. semiconductor testing company, Cohu Inc, is petitioning the Treasury Department to block the sale of another U.S. semiconductor company, Xcerra Corp, to a Chinese government-controlled fund. The current strategy in Beijing is to lower semiconductor imports through acquisition; 160 billion dollars in the next decade will be funneled into Beijing-backed private equity funds to that end.

Will the US Treasury Department stop the sale of a US semiconductor company, Xcerra Corp to Beijing backed fund, or will the taxes from the sale be too lucrative to pass up? Quibbl here.

The US-China economic relationship is so intertwined that talks of an all-out trade war may be overblown, with Chinese experts expecting increased pressure on the currency exchange rate, at worst. Yet the Chinese economic threat has been among Donald Trump’s most consistent political talking points, his public concern stretching back decades. A 2011 tweet warned, Wake Up America — China is eating our lunch.” In the midst of conflict on the Korean peninsula and domestic policy disputes with Congress, it will certainly be interesting to see what moves he makes regarding China and whether or not they’re seen as successful.

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