Someone should have told Trump that the one thing he must never even consider doing is to start an economic war with China. Unfortunately, that's what this president, an economic lightweight, recently did.
This is not yet a trade war but it could easily evolve into one. In such a war does China have the weaponry to fight back against the U.S. tariffs that Trump initiated?. You bet it does, more than one might think. So let's talk about some of this weaponry.
China has a very large, growing economy powered by a huge manufacturing sector, the largest in the world, one that the U.S. once operated until American companies decided that they could generate much greater profits by replacing American workers with those in China. So they transferred the bulk of their manufacturing to China.
It's difficult to determine what the average hourly wage of Chinese workers is because wages across this huge country vary so very much. By reviewing the typical wages in the largest manufacturing sectors such as Beijing, we find that they are somewhere between $2.20 and $3.60 per hour. They have been increasing in recent years.
Compare that to the $7.25 per hour minimum wage in the U.S and the fact that wages for jobs in what's left of the U.S. manufacturing sector are much higher. Also, we will soon be seeing U.S. companies following Amazon's recent move to adopt a minimum wage of $15.00 per hour.
So how in the world does Trump think U.S. companies are going to be able to compete with Chinese manufacturers?
On July 31 of this year, Trump said that U.S. Steel was opening six new steel mills but that company has not verified it. It has shown no intention of doing so at this time. Why would it spend many billions on new mills when it knows it cannot compete with China in the production of steel?
Will these Trump tariffs hurt China and adversely affect its economy? Without question, they will to a certain extent and it's a dilemma for that country. But, as we know, the Chinese have so much economic power that they can absorb a lot of hits to their economy if need be and then bounce back.
Why are these tariffs going to backfire? They are actually a tax on Chinese products coming into America and are going to hurt many American companies and consumers. Are consumers going to stop buying much higher priced Chinese products such as cell phones, TV's, computers, and other electronic products that the U.S. no longer makes? No, but they certainly will cut back their purchases.
Prices on a myriad of imported products are rapidly increasing. Prices of steel, used on a multitude of products, are skyrocketing. Auto industry analysts are reporting that we could see the prices of autos increase by $8,000. When you buy a washer or dryer in the near future you will pay a lot more.
Harley Davidson is moving some of its production to Europe, and other U.S. companies are contemplating doing the same.
China is retaliating against U.S. tariffs by slapping their own tariffs on American imports, and farmers in this country are seeing Brazil, Canada, Argentina, and Russia shipping more and more soybeans, corn, and wheat to China. The relationships farmers have built with China are rapidly eroding.
China could retaliate in other ways. For example, it could devalue its currency to make their exports less expensive. That would create turmoil in the financial sectors and also negate these tariffs somewhat.
If China gets to the point of no return would it actually consider selling off some of its holdings of U.S. securities? This would be a last resort for it but when it's economy takes a massive hit because of the tariffs anything can happen. And such a move would prove to be disastrous for the U.S.
Why exactly? So far this year, the federal government has paid more than $455.6 billion in interest on its national debt. It paid $458.5 billion in interest on the debt last fiscal year. When the figures for August 2018 interest payments are calculated, the government will have spent more on interest in fiscal year 2018 than all of fiscal year 2017.
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