Donald Trump's Trade War is 10 Years Too Late -Part 1

In 2009, the year after the 2008 GFC (Global Financial Crisis), world trade shrank for the first time in half a century. China then was far more dependent on the American market in terms of percentage share of exports to GDP.

Over the past 10 years, China's GDP more than doubled, averaging more than 7% per annum, though economic growth ranges between 6.5% to 6.9% in the last 3 years but overall the average annual growth rate was well over 7% in the past decade for the Chinese economy to more than double between 2007 to 2018.

After the onset of the 2008 GFC, the drastic fall of demand for Chinese exports in the American and European markets, massive efforts and policy initiatives were taken by the Hu/ Wen led Chinese government to diversify and restructure the economy away from the export-led economic growth especially to the debt-laden American economy which is predicted to implode cyclically given its massive imbalance in its GDP consumption spending composition, savings rate, budget deficit etc. After 10 years of silent but relentless slogging, the Chinese economy is far more diversified, urbanisation has continued to intensify, services has become much larger as a share of GDP, social security has improved and more and more Chinese consumers are confident and willing to spend on consumption. All these implied that any protectionist measure especially tariffs would harm the American consumers and economy much much more than the Chinese.

With the US economy heavily in debt and the average consumers highly leveraged, the days of the American economy as the number one consumers are likely numbered and its importance diminishing each passing day. Any further escalation of the current budding trade war posts far more systemic threat to the American than the Chinese.

All the major political events in China such as last year Oct Party's Congress and this year March NPC are over. President Xi Jinping has consolidated his power and the people and society are ready to stand united behind the government in any economic showdown forced upon them by the imperial American white supremacists. On the other hand, the domestic political battles in the US are just beginning and subjected to change especially from missteps in managing the economy and international relations which bring more setbacks than benefits to the American economy.

Donald Trump is facing a more and more uphill battle in the upcoming mid-term election to maintain the Republican razor thin majority in the US Senate and given more and more House of Representatives seats held by the Republic are becoming hot battle grounds, even the majority in the lower Congress is under threat. By losing their majority in the coming mid-term, Donald Trump would probably become the most "besieged" US President in history and his remaining term may just become pure lame duck and all about dodging impeachment as much as possible. Also he will likely face a strong challenge for the 2020 Presidential bid within his party if he survives a full term till 2020.

Given such outlook, likely Donald Trump would become more and more desperate in maintaining the majority in the Congress. Desperation probably would lead to taking more and unnecessary high risks. As most of his best advisors are gone and now surrounded by like-minded hawks, the perils of groupthink under such circumstances are much more heigthened and the enactment of "Bay of Pigs 2" groupthink fiasco may become more and more of a reality.

Above article posted by Leo81