Trump wants a deal, but does China?
How do I know that? Because Trump said so:
President Donald Trump said in a Twitter post that he plans to meet with Liu on Friday, adding that it’s a “big day of negotiations with China. They want to make a deal, but do I?”
Wait, isn’t that the exact opposite? Yes it is. But Trump always says the exact opposite of what’s true. A perfect phone call is a disastrous phone call. A traitor is a patriot. The man who respects women more than any guy other actually respects them less than any other guy. The wisest leader is the least wise. I could go on and on.
You have to know how to read Trump, then it’s as easy as reading the mood of a 4-year old child.
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10. October 2019 at 15:53
Yes Scott, so true, especially on how to read Trump. Every day is opposites day with him. He reliably accuses others of exactly what he has done.
10. October 2019 at 18:11
Harvard has no anti-Asian bias whatsoever. It has an anti-gentile White bias. Focus on the obvious, Sumner.
10. October 2019 at 19:24
OT but about trade and interesting…
https://www.bloomberg.com/opinion/articles/2019-10-10/inequality-globalization-and-the-missteps-of-1990s-economics
Not quite a mea culpa from Paul Krugman and no, he is not now a Trumper on trade….but interesting.
Also, on quick read Krugman entirely sidesteps the issue of what heavy capital inflows (the obverse of current-account trade deficits) do to domestic asset values, including property and housing prices, in trade-deficit nations. (The IMF says such sustained capital inflows leads to bloated and vulnerable asset values, see 2008.)
As to Trump or Xi needing a trade deal, perhaps neither needs a deal. The most over-rated issue in recent times has been the Sino-US trade impasse. The volume of trade between the nations has slipped a little.
https://www.census.gov/foreign-trade/balance/c5700.html
These figures eyeball to about $50 billion in monthly Sino-US trade in 2018, down maybe $10 billion monthly from 2018.
US GDP will be about $20 trillion in 2019. China’s about that, depending on what metric you want to use.
$40 trillion in annual GDP vs. a $120 decline in trade between between China and the US? And while trade with most other nations is still open? That is. US customers can still buy steel from Japan, Thailand, etc. Cars from anywhere. Anything from everywhere, and the globe is glutted with product.
Trump tariffs are not Nixon quotas on auto imports, or Reagan’s “voluntary restraints” restraints on Japanese imports (quotas).
American customers can still buy China goods, just with a higher tax applied. If a good is vital, and substitution or conservation does not do the trick, then the good can still be bought.
The central bankers must love this dominant storyline about trade. They can suffocate the world’s economy to their heart’s delight, and then watch “Trump tariffs” get blamed.
11. October 2019 at 03:19
Life in funny….courtesy Bloomberg
China Hit by EU Tariffs as High as 66%
By Jonathan Stearns
October 10, 2019, 3:54 PM GMT+7 Updated on October 10, 2019, 10:32 PM GMT+7
EU duties as high as 66.4% counter alleged below-cost imports
Levies mark preliminary outcome of dumping investigation
Those EU guys make Trump look like Peter “Milquetoast” Pan.
11. October 2019 at 06:49
@Benjamin Cole, I was just about to bring up Paul Kurgman’s article and gauge Scott’s thoughts on it. Having re-read Krugman’s Pop Internationalism and looking at his latest Bloomberg piece, I came away underwhelmed. As you stated, he side stepped several issues. First, his data points on third world export growth was shown as percentage of total world GDP, nothing specific broken out for US. Specifically, there was lack of data on Third World and US trade. Given how much world trade has grown and how much third world to third world trade as grown, I was disappointed he didn’t have a clear data point. Second, his import shock graph (showing percentage of manufacturing job losses) had the biggest trend decline in 2000, when a wave of internet automation just started to take hold. (2000 was before China joined WTO). I did notice that manufacturing jobs had started to recover in 2010, right around time China started to adjust their economic model away from exports to consumption. (One can debate how successful China has been at that, but the data point is interesting.). Third, he didn’t provide an update on import metrics (he considered them important in Pop Internationalism) such as import export price as precent of national income. When I searched online for these, they looked to have been pretty stable since 1990s. Fourth, his link to David Autor et. al paper in 2013 is hardly convincing. That paper had its own issues but it never changed the main economic narrative that trade impact can be local and long lasting. Fifth, he still states the 1990s economic analysis were correct in the long run. So for me, who expected a more thorough update on data based on Pop Internationalism, I came away feeling deflated because there just wasn’t much data.
11. October 2019 at 07:39
LC, Today, Tyler Cowen linked to an interesting study of the China shock.
Krugman’s piece is defensible, but I think he overrates the importance of trade on inequality. The vast majority of job loss in autos, steel, coal, etc., are automation, not trade. Certain sectors like apparel have been hit hard, but that’s not enough to explain the broad trends in the American economy. But yes, the early 2000s were a significant trade shock, which was disruptive for many people.
Krugman correctly points out that the trade shock has been over for some time, and thus Trump’s fighting a problem that doesn’t currently exist.
11. October 2019 at 07:57
Thank you Scott. Interesting data points and thanks for the pointer.
11. October 2019 at 08:03
A 4-year old child who won Michigan and survived a serious coup attempt.
11. October 2019 at 10:27
This prediction is turning out pretty correct! Hopefully, if Trump wins in 2020, he does not immediately ratchet back up the trade war. It seems like the main achievement today is Trump agreeing to back down from tariffs.
11. October 2019 at 11:23
@derek: Trump was always going to eventually cut a trade deal, to help get himself re-elected. He causes a problem, fixes it, and declares a major victory. Pretty standard electioneering.
Once he wins another term though…oh boy, then we will see what he really wants. Congress will continue to constrain him, so he will go hog wild on things like trade wars where he has little oversight.
11. October 2019 at 16:00
So, going by Sumner’s theory of Trump’s statements, it wasn’t a big day, there weren’t negotiations, China maybe doesn’t want to make a deal, but Trump does. So, given that the outcome was that the US will not further raise tariffs when it had previously announced it would, and that the US will sell China agricultural goods when China actually needs those goods to keep food prices from rising too much, it does look like these events don’t disprove that theory.
11. October 2019 at 16:12
LC—
Macroeconomists constantly try to cram reality into their theoretical paradigms.
There is a reason for this, that is that the theories are useful.
But only to an extent.
There are ramifications to global free trade and globalized financial markets that I think will require a re-examination of orthodox macroeconomics.
In fact, this is already happening with people like Stanley Fischer advocating money -financed fiscal programs.
The succeess Far East nations, with the heavy interrelations connections and support between government and business, raise challenges to the idea that pure free enterprise and trade is the best way to elevate a nation’s population.
Another challenge is that the employee class of developed nations no longer reproduces itself. This is seen most clearly in Hong Kong where every woman has but 1.2 babies.
The idea that a nation must have a rising population is probably outdated, yet the idea that nations should have shrinking populations is yet to be tested. It may be that Japan will see greater prosperity and a higher quality of life on a per-capita basis following its policies.
People in Sapporo, Japan probably have higher living standards than people on the West Coast of the United States. A one-bedroom apartment in Sapporo rents for $450 a month, about one-third of that as in Los Angeles.
The solution of Western elites to the problem they have created, that is the employee class will not reproduce, is to sacralize immigration.
We can wonder if Western elites have developed a sustainable model.
12. October 2019 at 12:17
Justin, You said:
“a serious coup attempt.”
LOL. They are really coming out of the woodwork now.
derek, Thanks, but I don’t think I was quite correct. I expected a bigger deal.
Burgos, Yes, looks like a minor deal.