The trade war math

Watch carefully now as various politicians, pundits, editors, news anchors, etc. weigh in on the U.S.-China trade war.  You won't know truly who is on Beijing's payroll, but it'll be fun to guess.  Watch for surprises and non-surprises (Hi, Senator Feinstein!).  Get ready for a barrage of cataclysmic warnings about the U.S. economy and the financial markets.

As a scientist, I feel it useful to occasionally engage in facts, and for me, the simpler, the better.  So try this scenario: if Country A exports 20X more to Country B than Country B does to Country A, which side do you think has more to lose in a protective tariff war?  Could it be the country that exports substantially more?  Hmm.

Country A in this little exercise is China.  Its exports to the U.S. (Country B) dwarf U.S. exports in return.  After all, over 40 years, the Chinese swallowed a big gulp of our domestic manufacturing, and it's been hard at work stealing our technology and intellectual property.  If China and the U.S. now install similar tariffs, it is not quantum physics to see that a tariff war will hurt China far more than the U.S., as the cost of Chinese exports (the major factor in the equation) mushrooms.  After all, the three major trading partners and markets of the U.S. are Canada, Mexico, and Europe — not China.  Want to bet that the reverse is not true?

So as your 401(k) and IRAs start sinking (for now), rest assured that "this too shall pass."  In the words of the immortal Admiral Yamamoto, China has "awakened the Sleeping Giant."  Things will not be the same.  Americans finally elected a populist president, and Beijing is just now waking up to that fact.  I think the Beijing air quality will be poorer than normal this summer.

Oh, by the way — the major American export to China is...?  Answer: food.  Try making that substantially more expensive in the world's most populous country!  Thank you, President Trump!  Yet again!

Watch carefully now as various politicians, pundits, editors, news anchors, etc. weigh in on the U.S.-China trade war.  You won't know truly who is on Beijing's payroll, but it'll be fun to guess.  Watch for surprises and non-surprises (Hi, Senator Feinstein!).  Get ready for a barrage of cataclysmic warnings about the U.S. economy and the financial markets.

As a scientist, I feel it useful to occasionally engage in facts, and for me, the simpler, the better.  So try this scenario: if Country A exports 20X more to Country B than Country B does to Country A, which side do you think has more to lose in a protective tariff war?  Could it be the country that exports substantially more?  Hmm.

Country A in this little exercise is China.  Its exports to the U.S. (Country B) dwarf U.S. exports in return.  After all, over 40 years, the Chinese swallowed a big gulp of our domestic manufacturing, and it's been hard at work stealing our technology and intellectual property.  If China and the U.S. now install similar tariffs, it is not quantum physics to see that a tariff war will hurt China far more than the U.S., as the cost of Chinese exports (the major factor in the equation) mushrooms.  After all, the three major trading partners and markets of the U.S. are Canada, Mexico, and Europe — not China.  Want to bet that the reverse is not true?

So as your 401(k) and IRAs start sinking (for now), rest assured that "this too shall pass."  In the words of the immortal Admiral Yamamoto, China has "awakened the Sleeping Giant."  Things will not be the same.  Americans finally elected a populist president, and Beijing is just now waking up to that fact.  I think the Beijing air quality will be poorer than normal this summer.

Oh, by the way — the major American export to China is...?  Answer: food.  Try making that substantially more expensive in the world's most populous country!  Thank you, President Trump!  Yet again!