So far, the big trade war loser is China, not the US

October 31, 2018

Excerpt: “The dirty secret of globalization-driven cheap-labor offshoring is that it has boosted profits by much more than it has lowered consumer prices. The claim is that consumers will be hurt, but in the first instance, it is likely that the huge profit margins of the offshoring firms get whittled down first. They’ll still make profits, but not the same kinds of windfalls from cheap labor.”

Trade wars are neither easy nor costless, in spite of the insouciant assertions of US President Donald Trump to the contrary. But it is also the case that those who predicted that the farsighted mandarins who guide China’s economic policy would win this battle might be similarly guilty of misplaced confidence.

[Marshall Auerback |  OCTOBER 31, 2018 | ATimes]

It’s early days, but so far the constellation of economic data that has come out of both countries suggests that it is China, not the US, that is bearing the brunt of this particular skirmish. And so long as the US economy continues to grow, the corollary is that we should stop regarding these protectionist measures as temporary aberrations in America’s internationalist policies, especially on free trade.

Rather, this is the new normal: an expression of a rabid 19th-century-style nationalism, reversing decades of globalization and shifting the worldwide economy into a series of competing regional blocs and alliances in the process. Maybe even a new cold war (with China this time, not Russia) is looming.

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  • Bruce Bishop
    Stop saying “cheap labor!” Everything is cheaper in China. All of the manufacturing cost factors are eventually reflected in someone’s paycheck. China has a ten to one cost advantage over us in ALL cost factors. Not only labor, but material, overhead, energy, transportation, and construction. Their biggest cost advantage might be in “compliance,” where U.S. manufactures spend a fortune trying to conform to short-sighted government regulations, whereas, China has zero compliance costs.