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PaperclipPerfector  24d ago (text post)   32415 thread views

Culture War Roundup for the week of April 7, 2025

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https://x.com/TrumpDailyPosts/status/1909263788295041257

Yesterday, China issued Retaliatory Tariffs of 34%, on top of their already record setting Tariffs, Non-Monetary Tariffs, Illegal Subsidization of companies, and massive long term Currency Manipulation, despite my warning that any country that Retaliates against the U.S. by issuing additional Tariffs, above and beyond their already existing long term Tariff abuse of our Nation, will be immediately met with new and substantially higher Tariffs, over and above those initially set. Therefore, if China does not withdraw its 34% increase above their already long term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th. Additionally, all talks with China concerning their requested meetings with us will be terminated! Negotiations with other countries, which have also requested meetings, will begin taking place immediately. Thank you for your attention to this matter!

https://x.com/unusual_whales/status/1909411006423392583

China Ministry of Commerce has just said: "Will fight until the end if US Insists on new tariffs"

China urges dialogue with US, strongly opposes 50% additional tariffs

So the two biggest economies are now locked in a full-scale trade war... I suspect this will be more severe than previous skirmishing. In the past China imposed restrictions on imports of Australian wine, lobster and coal due to us calling for an inquiry into COVID. The Australian government basically ignored this without retaliating and eventually (with a change of govt over here to the less anti-Chinese Labour party) the restrictions were dropped. And they didn't touch iron ore, our biggest and most important export.

But nobody really cares about Australia, there's no loss of face in restoring trade relations like there would be with being seen to submit to Trump. You can show magnanimity to a weaker country but you probably can't show weakness to a peer power. Plus the US-China tariffs seem to be much more comprehensive, there's no shielded goods listed. I highly doubt that Xi will back down here like Trump seems to be asking. Giving a one day ultimatum is quite rude.

It seems that Trump's strategy is to shake down the US's weaker trading partners (the 'other countries which have requested meetings') and try to smash the stronger powers like China and possibly the EU. The EU might even fall into the 'weaker' category if Trump can link security to the trade relationship, Vance and co wanted to send Europe the bill for bombing Yemen since it was mostly European trade flowing through the Red Sea. The US has opportunities for leverage in terms of energy flows now that Russia is persona non grata and with defence via NATO. On the other hand, the EU is run by Trump-haters and they're hardened experts in economically wrecking their own countries, so they may show some backbone.

Anyway, who has more leverage between the US and China?

China's exports to the US ($500 billion) are mostly manufactured goods, electronics and machinery. These are ironically the things you'd need to industrialize the US, though a lot is also consumer goods. China dominates certain industries like port equipment as seen here: https://old.reddit.com/r/Unexpected/comments/11jsyyf/well_thats_unfortunate/

https://tradingeconomics.com/china/exports/united-states

The US's exports to China ($144 billion) are a mix of agriculture/energy and electronics (semiconductors are included in this category), aircraft, machinery.

https://tradingeconomics.com/united-states/exports/china

Personally I favour a supply-focused view of trade conflicts. If you're losing out on $500 billion worth of goods due to high tariffs (an additional 50% on top of the 34% and the previous tariffs really add up!) then that's worse than 34% or 84% if Xi matches on a mere $144 billion. Many of those goods will be prerequisites for US production. A much smaller proportion of Chinese imports will be prerequisites and soybeans/gas can be bought from elsewhere. Plus the Chinese approach to industrial policy seems much more sophisticated, they target key sectors to build up economies of scale. They foster development in high-tech industries with huge state backing. They do plenty on the supply side, tariffs only affect prices and demand. I think China is not too concerned about losing US imports, they want to replace them with indigenous suppliers on the high-end anyway and have been working hard to do this for years and years, that's Made in China 2025. There is no equivalent comprehensive program to reshore production in the US.

And if China loses some of their exports, at least they retain production capacity. Those mobile phones and plastic toys could go to Chinese kids instead.

I've seen others online favouring a demand-focused view, so there is room for difference on this (elasticity matters a lot).

I think China will come out ahead here unless Trump manages some crazy 4D chess bullying other nations into tariffing China too. China is the central hub of the world economy in terms of trade flows, their economy is larger in real terms and their political system seems to be more stable, less erratic.

Edit: https://x.com/typesfast/status/1909362292367802840

On April 17th the U.S. Trade Representative's office is expected to impose fees of up to $1.5M per port call for ships made in China and for $500k to $1M if the ocean carrier owns a single ship made in China

This seems even crazier if true, it's like Trump is deliberately trying to crash the US economy with these hasty, no-warning orders and fines. See the thread for details. This is how you don't do industrial policy.

My impression after obsessively monitoring this situation for days (of course) is that neither side will fold, tariffs are here to stay, and everyone will be poor and mad for it. China of course won't fold, the idea that they're at risk is preposterous, they can well weather complete cessation of export to the US.

Broadly I have concluded that the main problem the US faces is racism towards the Chinese; the ill-earned sense of centrality and irreplaceability. I believe that Trump, Navarro and the rest of that gang are as misinformed as the average MAGA guy on Twitter, given how they speak and that amusing formula. Americans still think that their great consumption is the linchpin of Chinese economy, 10-30% of their GDP (it's more like 3%); that the Chinese produce apparel, “trinkets” and low-quality materials (they also produce things that Americans plausibly cannot start producing at the same quality in years); that American IP is vital for their industry (they're making their own software, OSes, CPUs…) and so on. The idea that American de-industrialization is a product of betrayal by Wall Street Elites who offshored jobs to China also feeds into the delusional notion of possible parity – but the truth is that there has never been a point in history where American industry had scale or diversity comparable to what's going on in China now. The issue with their bad financials is also overblown; as for losing markets, they have the capital at hand for consumption stimulus. This guy from Beijing writes:

China’s PPP GDP is only 25% larger than that of the US? Come on people… who are we kidding? Last year, China generated twice as much electricity as the US, produced 12.6 times as much steel and 22 times as much cement. China’s shipyards accounted for over 50% of the world’s output while US production was negligible. In 2023, China produced 30.2 million vehicles, almost three times more than the 10.6 million made in the US.

On the demand side, 26 million vehicles were sold in China last year, 68% more than the 15.5 million sold in the US. Chinese consumers bought 434 million smartphones, three times the 144 million sold in the US. As a country, China consumes twice as much meat and eight times as much seafood as the US. Chinese shoppers spent twice as much on luxury goods as American shoppers.

…It is prima facie ridiculous that China’s production and consumption, at multiples of US levels, can be realistically discounted for lower quality/features to arrive at a mere 125% of US PPP GDP. … Similarly, analysts who lament that China accounts for 30% of the world’s manufacturing output but only 13% of household consumption are far off the mark. China accounts for 20-40% of global demand for just about every consumer product but much of the services it consumes have been left out of national accounts.

Accordingly, with a higher real GDP, their effective debt to GDP ratio may be as low as 150%, not 200-300%. They have US assets to sell too.

So China can trivially absorb half of the overcapacity freed by reduced trade with the US, and might find buyers for the rest.

My thesis is that in picking this fight, Americans don't understand that they're actually not that big of a deal. Unfortunately, their delusions are globally shared and become reality in their own right. But perhaps not enough to offset the gross physical one.

The actual dangerous thing for China here is that Trump seems determined to immiserate the whole planet, completely irrespective of any geopolitical rivalry, because he's an illiterate anarcho-primitivist and thinks that all trade is theft unless it's barter, basically. America vs. The World, especially with a chain reaction of tariffs on Chinese (and likely also Vietnamese etc…) capacity spillover, results in massive reduction of productivity for everyone. For now, nations like Vietnam are unilaterally dropping tariffs on American crap, but that can't be a big effect because their tariffs were low to begin with, and Americans just don't and cannot produce enough at price points that people of those nations can afford. (We may see IMF loans for 3rd world countries importing overpriced American beef or Teslas or whatever to placate Don, but I doubt it'll be sustainable). I suppose in the long run the idea is that Optimus bots will be churning out products with superhuman efficiency, at least Lutnick argues as much. But that's still years away. Perhaps this extortion of zero balance trade (so in effect, the demand that trading partners buy non-competitive American products) is meant to finance the transition to posthuman automated economy. Bold strategy.

I am of course very amused and curious to see how it'll go. Will Fortress America intimidate the rest of us into submission, likely forever? Or will it be so stubborn, brutal and ham-fisted that humanity will finally rebel and ostracize the rogue state, letting it broil in its own supremacist fantasies? Can Bessent et al. turn 1D “trade le bad” checkers of the King of Understanding Things (懂王) into 4D chess? We shall see.

China’s PPP GDP is only 25% larger than that of the US? Come on people… who are we kidding?

Its not hard to pick out a few industries youre strong in. The only number there thats worth taking seriously for macro measures is electricity. And that still seems consistent with the 25% number - manufacturing generally needs more electricity than services, e.g. Icelands GDP is not actually underestimated. Theres an argument that services are BS and therefore Chinas economy really is better - but at that point, youre far enough from conventional economics that GDP is a questionable measure anyway.

But he actually argues that the Chinese services sector size is underestimated, by Chinese accounting mainly.

We believe China’s GDP and PPP GDP are lowballed by an incomplete transition from the Material Product System (MPS) of national accounts, which excludes services by design. The World Bank is likely dutifully doing its sums with goods consumption in China multiples of the US but measuring services consumption as a fraction of the US.

The United Nations System of National Accounts (UNSNA) provides voluntary guidelines and specifically states that nations should base their national accounts on local conditions. What that has meant in the West is to adopt all UNSNA “innovations” introduced over the years.

Items like imputed rent, legal fees and R&D are now all included in GDP. The UK went hog wild with both illegal drugs and prostitution as now part of their GDP because… hey, why not? UNSNA’s 2008 guidelines explicitly recommend that illegal market activity should be included in GDP.

China’s NBS stood its ground on a conceptual level. Rightly or wrongly, the Leninist MPS considers services necessary costs of material production rather than real value creation. In China’s first attempt at converting MPS to SNA in 1985, it tacked on a ludicrously low 13% to the MPS number and called it China’s services GDP.

Over the years, the World Bank has twisted the arm of the NBS for modest increases to China’s services GDP – with limited success.

The affordability crisis in Western economies, the US in particular, is largely driven by inflation of necessary services – rent, healthcare, education and childcare – not by manufactured goods. While these costs have also gone up in China, they have increased less and much are left out of GDP anyway.

Also not captured by the ICP survey conducted in 2021 are the price and service wars that have broken out across industries and products – a bane on businesses but a boon for consumers.

This is most visible in China’s car market with OEMs either cutting prices to the bone (Hyundai Sonatas down to $17,000 from $42,000) or offering cutting-edge technology for peanuts (a 2,000-kilometer range BYD Q plug-in hybrid electric vehicle for $14,000). The price of solar panels fell 50% in 2023 and continues to trend down in 2024. CATL has announced plans to cut lithium-ion battery prices in half by the end of 2024.

Restaurants are offering white glove perks like hot towels, lotion by the sink and snazzy remodeled decors. Hairdressers hand out bottled water and fruit plates. Tech companies have slashed large language model (LLM) prices to basically free. Service quality in China, impossible to quantify, is now head and shoulders above the West and probably even Japan.

Adherence to UNSNA has caused a breakdown in the meaning of GDP. As necessary services become an ever larger share of Western economies, their growth does not appear to result in discernable improvements in living standards.

It's not a workshop country. The thesis isn't that they have a strong industry - everyone knows that.

If Chinas service economy is actually triple of what those numbers say, it gets you from 125% of US to ~155% - not a significant change to debt/GDP.

The affordability crisis in Western economies, the US in particular, is largely driven by inflation of necessary services – rent, healthcare, education and childcare – not by manufactured goods.

This is still propably a problem with the concept rather than the measurement - depending on how exactly PPP is defined, but just a few things being weirdly expensive it would likely miss. With housing especially, if you consider the value of location at all, its hard to see how international "quality" comparisons could be made.

Also not captured by the ICP survey conducted in 2021 are the price and service wars that have broken out across industries and products

Why are they not captured?

it gets you from 125% of US to ~155% - not a significant change to debt/GDP.

Fair. This author thinks that the real scale is Chinese economy is 2x of the US or more, all things considered.

With housing especially, if you consider the value of location at all, its hard to see how international "quality" comparisons could be made.

I think American housing value is inflated by the peculiar, unique necessity of getting away from Undesirable People while still being in the vicinity of jobs, schools and other desirable factors.

Why are they not captured?

For example, how do you compare the utility of a high-status American SUV and a noname Chinese SUV with some crazy AI-driven suspension or drone launch pad, especially if they do not meaningfully coexist on either market?

I think American housing value...

And how do you expect this fact to make its way into PPP determinations? I mean even aside the overton considerations, is there any way to say how much of US housing prices are due to this, beyond "I reckon"? At risk of meme-ing, if I said that living in a free and democratic country is valuable to consumers and this is reflected in the prices of the naturally limited houses-near-XYZ in such countries, how do we know youre right and Im wrong? Indicator measures arent useful if measuring them is epistemology-complete, which is why PPP is almost certainly defined in a way that cant detect these things.

especially if they do not meaningfully coexist on either market

Im sure this is true in some cases, but I dont think its true "across industries". And with services it seems like the default case - e.g. the "style of waiting" in everyday-grade european restaurants propably isnt offered in the US - so they propably have some strategy to capture it anyway

I think that if we are trying to genuinely compare apples to apples, PPP is inadequate between significantly different developed systems and we may indeed have to fall back to Marxism-Leninism and factors of production. In the end, what is being discussed is whether China will be able to finance their debt, and any analysis must have to backchain to the possibility to say anything about that.

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