The long and the short of the U.S.-China fisticuffs is that no trade barriers are coming down, and no new trade openings are popping up. China has gone rogue by putting export controls for rare earths and other commodities on the entire world. And of course, the U.S. has got to punch back. Scott Bessent is right, China is a command-and-control economy, and our allies will neither be commanded nor controlled.
Rare earth deals were struck in various meetings in London, Geneva, Madrid, but China is breaking the deals. Just like they broke the deal for the Phase One trade agreement that was signed in January 2020. They go rogue. Maybe the Commerce Ministry is going rogue. Maybe Xi is going rogue. Who knows. But China going rogue is gonna hurt them more than it hurts us. It’s their economy that’s in recession shape, and we are the great consumer power that they desperately need.
Now China is surely losing friends if they had any to begin with. Australia’s furious at China. Japan. The EU. And of course, the U.S. Mr. Trump will slap a huge tariff on November 1st, unless China relents. The U.S. must punch back.
I still think it could be that China is throwing a temper tantrum because they’ve been so badly beaten in the Middle East with President Trump’s historic peace deal and the destruction of China-backed Iran. Another defeat may be looming as Mr. Trump focuses on ending the Russia-Ukraine war. China’s backing the wrong horse there too.
Meanwhile, the U.S. Senate wants to slap a 500% tariff on China for the purchase of Russian oil. 100% will do fine. Once again, China’s backing the wrong horse. By the way, with a 50% tariff, India has stopped buying Russian oil.
Chinese trade petulance is bigger than rare earths. They and their BRIC allies have been buying enormous quantities of gold over the past ten or more years, while they have reduced their U.S. Treasury dollar bond holdings by nearly 50%. What are they doing? Well, they’re working overtime to diminish the world reserve currency status of the U.S. dollar.
So, here’s President Trump’s response to that one: “I like the dollar. I’m very strong on the dollar. And anybody who wants to deal in dollars, they have an advantage over people that aren’t. But for the most part, we’re keeping it that way. Like BRICS. I told anybody that wants to be in BRICS – that’s fine. But we’re going to put tariffs on your nation. Everybody dropped out. They’re all dropping out of BRICS. BRICS was an attack on the dollar.”
Pure and simple. Mr. Trump is right. BRICs and China are attacking the dollar. More rogue behavior.
So, the wisest course right now would be a meeting at the APEC conference in South Korea between Mr. Xi and Mr. Trump. Perhaps then we can get back to lowering trade barriers and promoting prosperity. But if China insists on playing the petulant spoiled brat as they keep losing ground in world politics and influence, then so be it. Count on Donald Trump not to stand for China’s bad behavior. They’re going after the wrong guy.
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