China's Leverage and Attack Plans

Nuclear Options

China's Defensive Strategy

Conclusion

Trump and his supporters are convinced that we can easily win the trade war against China. After all, we buy $500 billion worth of goods from them, andof goods from us. So the logic goes, "they need us more than we need them!" But is it that simple? Let's analyze.. This not only affects the manufacturers, but also re-sellers and consumers.So, if a Lenovo laptop - made in China by a Chinese company - suddenly becomes 25% more expensive because of Trump's tariffs, US retail stores and middlemen such as Best Buy, Target and Amazon also suffer. US consumers will now either pay more or have to forego some of the products they like. Also, look at who supplies the parts for those laptops - Japan, South Korea, Taiwan and even US manufacturers (Intel, Nvidia and others). All of them will lose money in this scenario.Moreover, there are countless American corporations - think clothing, shoes, accessories, toys, auto parts, home appliances, electronics and more - which manufacture goods in China and import them.This is why powerful groups such as the US Chamber of Commerce, Business Roundtable, National Retail Federation, American Soybean Association and 50 others are now lobbying Congress to stop Trump's tariffs.China is not like Russia or Iran who can be sanctioned without any repercussions for the US economy., which means that China won't be easily bullied by US tariffs or sanctions.China is the largest buyer of US soybeans and a significant buyer of other US agricultural/farm products (corn, sorghum, pork, beef, fish etc.). China can impose punitive, retaliatory tariffs on these US items, and switch to other countries - for example, get soy from Brazil, corn from Argentina, sorghum from Nigeria, oil from Iran and so on.China has issued a list of 600+ US products that will be targeted by July 6. Here are the highlights:China hassuch as Apple, Walmart, GM etc.That will crush those mega corporations as well as the US stock market.There areSimilarly, various food, retail and hospitality enterprises - think Starbucks, KFC, McDonald's, Sheraton, Hilton etc. - all make tens of billions of dollars of profit every year in China. A nasty trade war between US and China will result in tremendous losses for these companies.50%? 75%? A complete breakdown of US-China trade will devastate the US economy, as empty shelves in the US stores will mean many bankrupt businesses and furious American consumers. The US will look like Venezuela, at least temporarily.China's government may also encourage a boycott of US products. Japanese and South Korean companies have many sad stories to tell on this topic.In 2016, more than 3 million Chinese tourists came to the US and spent over $33 billion . Perhaps they will be more inclined to visit Europe during a US-China trade war.Then there are the deadly arrows in the quiver, such as. In a recent interview, a Chinese government economist warned that the US-China trade war could lead to a "financial war beyond our imagination."Finally, many people don't realize that China is our primary, if not the only, supplier of), which are needed to make touchscreens, hybrid cars, MRI machines, missiles etc. China has a virtual monopoly on the mining, refining and processing of these minerals/metals. This gives China enormous retaliatory power.Of course, the US also has a nuclear option: semiconductor chips. China depends on the US and America's allies for 90% of semiconductor chips , without which the Chinese economy will grind to a halt. The ongoing saga of ZTE illustrates how a massive Chinese company with 75,000 employees can go bankrupt in a couple of months without American (Qualcomm) semiconductor chips. The Chinese are hoping to close this gap with the Made in China 2025 plan, but this Achilles heel exists for the near future.First of all, China can mitigate the effect of US tariffs by. China knows how to do this very well. "You increase the tariff on my product by 25%? I will decrease the value of my currency by 15%!"If China has to reduce their pork consumption because of an embargo on US soybeans, people won't be marching in the streets of Beijing. No one should expect such good behavior in America in the same scenario!The US has to negotiate mutually acceptable trade deals with China, EU and others. The result of 25 years of extreme globalization is not going to be swiftly reversed by tariffs. A tit-for-tat trade war will be a painful drag on the entire global economy. And there won't be any winners in this game of chicken.Americans should be concerned about the excessive trade deficit, but it's a complicated issue. As I explained in my previous article , the official trade deficit numbers are misleading, US elites created a financial system thatother countries to have trade surplus with the United States, and without reasonable trade deficits, the US dollar can't be a global currency and the US can't be a superpower!