Ten years from now, if China's domestic market grows fast enough or if exporters can develop foreign markets, say Russia and Africa for example, the pressure on the Chinese to negotiate will be much less.
From Business Insider, Friday Nov. 30, 09:30:
Dr. Gary Shilling, the president of A. Gary Shilling & Co., spoke to Business Insider editor-at-large Sara Silverstein about the escalating trade tensions between the US and China.
- President Trump will meet with Chinese President Xi Jinping on Friday and Saturday at the G20 summit in Argentina — and the trade war will be a major topic.
- Economist Dr. Gary Shilling says that when it comes to trade, the buyer has the upper hand when there's plenty of supply. And in the scenario of the global trade war, the US is the buyer.
- Shilling says it's possible that China will "go to the mat" and things could get nasty. But ultimately, he believes the US will end up winning the trade war.
Sara Silverstein: And what do you think about Trump's trade war? What's the outcome going to be?
Gary Shilling: Here's the point that I continue to make. When you've got plenty of supply in the world, and I think you do — plenty of industrial capability, plenty of raw materials and so on — it's the buyer that has the upper hand not the seller. The buyer has the ultimate power and who's the buyer? US is the buyer, China is the seller. And besides that, if you say, if we weren't buying all those consumer goods from China, and you and I enjoy them, they're cheap, they're great. But if we weren't buying them, where would China sell them? They have no other place to sell them, and in the meanwhile, China's growth is slowing.
They've got a problem of huge debt expansion they're trying to curb, they're trying to deal with a shadow lending — a shadow banking system and so on and so forth. China isn't going to collapse obviously, but I think in this trade war, that the US has the upper hand.
If you look at how this whole thing developed, after World War II, the rest of the world was pretty much in ashes and we were promptly into the Cold War, so I think that implicitly or explicitly, we basically said, "We will let Japan and Europe export freely into the US," because that gave them the growth to revive in a postwar era and that was cheaper for us than garrisoning even more US troops around the world and having more border wars. Well, that was fine, but that era's over, and globalization has replaced it, so it's an entirely different scene, and I think as a result, you have this situation where China — China, you know, grew basically through exports and they went to Europe and North America.
But you know, they did it with some rather underhanded — we'd let them into the World Trade Center in 2001 and they basically have not fulfilled their promises, they have not opened up their technology, they're not opening up to our investments, they steal our technology, they demand tech transfers for companies that want to operate in China and so on. And so you've got a situation now where China is basically playing by the old game, when everybody could export to the US, but now when you see the unemployment problem, no growth and purchasing power for the average guy — the non-supervisory and production employees — no growth in real incomes for a decade and that has changed the whole scene and I think that's really what has gotten Trump elected and he's basically saying, "Hey wait a minute. We've got the upper hand here and we're going to go ahead."
I mean, people say nobody wins trade wars. Yeah, in the short-run you don't, but in the long-run ... the US will be better off.Now, they could go to the mat. Xi, who is basically the president for life in China, and Trump, he won't be around forever of course, but they could go to the mat and you could get a really nasty, all-out trade war and a serious global recession. I'm not predicting that. I think they probably will settle and China will begrudgingly give ground. They'll import more US goods, they'll ease up on required tech transfers, steal less of it...MORE, including video
