Monday, August 28, 2017

China holds all the 'Trump' cards to severely harm the dollar and the economy if the U.S. goes forward with trade war

With President Trump, now one really knows if his public bluster and rhetoric is for real, or simply a calculated move forged from his best selling book, The Art of the Deal.

However when it comes to China, the President is playing a different game than his counterparts over in the Far East.  In fact you could almost say that Trump's style is that of a high stakes poker player that often wins through his ability to intimidate weaker minds.  But unfortunately for The Donald, the Chinese are masters of the game of chess, and at this current time they hold many more pieces on the board to trap the U.S. in a number of gambits.

Last week, China's Ministry of Commerce intimated that they had three powerful tools they can use in retaliation should Trump go forward with his trade war plans, and each has the potential to be highly devastating to the U.S. economy.

China could take three countermeasures against the recent “Section 301” investigation initiated by the U.S. government, experts told 
With growing trade friction between the two largest economies, the spokesperson of China's Ministry of Commerce made a strong response on Monday, saying China strongly opposes unilateral and trade protectionism acts conducted by the U.S., and will take all appropriate measures to safeguard its legitimate interests. 
According to the report, limiting imports from the U.S., reducing exports to the U.S., and unloading dollar assets would be the most effective countermeasures.
China is America's largest export market behind the North America region, and also one of the fastest-growing export markets of the U.S. Uncle Sam relies heavily on China for trade. 
In addition, China is the second-largest export market of American agricultural products, buying 15% of the total export volume, according to U.S. government data.
Against such a backdrop, restricting imports of agricultural products and high-end goods would be a trump card for China as a counter action. - En.People.CN
While it is true that China would be harmed as well in a trade war with America, the difference is that China actually has much more productivity than the U.S., and more options to re-direct their output and exports.  Additionally, the U.S. consumer is extremely tapped out and in record debt, so any disruption to cheap imports from the Far East will cause higher inflation which will have devastating affects across the economic board.

There is an old axiom that says to never bite the hand that feeds you, and for the U.S. they desperately require the rest of the world to keep accepting the dollar just to sustain their economy.  And because of this, China will always have the advantage since at any time they can reject the global reserve currency for trade settlement, and simply cease to send America all the vital products they require now that they don't produce any on their own.


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